The US cotton good-to-excellent rate plunged 5 percentage points to 48% in a single week, an uncommon magnitude for this period. More alarmingly, the current reading is below last year's 51%, which itself was associated with a weak final yield. For the 2026/27 global cotton supply, this data signals a potential shift in a key variable.
Growth Progress and Quality Risks Converge
As of June 28, planting reached 97%, roughly matching the five-year average. However, the squaring rate stands at only 37%, slightly below last year's 38% and the five-year average of 36%—a seemingly small gap that hints at a slower plant development pace. The boll-setting rate of 9% aligns with the five-year average, but given the rapid decline in the good-to-excellent rate, the subsequent boll-setting period may face greater quality pressure.
From an industry transmission logic, weather conditions during squaring and boll-setting directly determine boll count and fiber length. If the good-to-excellent rate remains below 50% through July-August, the market will be forced to lower yield expectations. The current 48% is already at a historically low percentile for this period, providing short-term support for ICE cotton futures.
Drought Shadow Lingers Over Key Producing Regions
Although the USDA report does not disclose state-level data, combined information from the US Drought Monitor indicates below-average rainfall and tight soil moisture in key producing areas such as West Texas and Georgia. Cotton's water demand peaks during squaring to boll-setting, and drought stress directly leads to increased boll shedding and reduced boll weight.
This is not an isolated event. Over the past three crop years, the good-to-excellent rate has experienced a seasonal low in mid-July, but this year the decline came earlier and was more severe. If the drought expands further in early July, the USDA may lower its US cotton yield estimate in the July WASDE report, narrowing the global ending stocks outlook.
Practical Impact on Import Cotton Procurement
China, as one of the largest buyers of US cotton, has already signed contracts for the 2025/26 season ahead of schedule. However, changes in new crop growth data will affect procurement pace and pricing for the 2026/27 season.
- For mills: current ICE cotton futures prices have not fully priced in a potential production shortfall. If the good-to-excellent rate continues to decline, the import window may close early. It is recommended to lock in basis for September-December arrivals in tranches before the July USDA report.
- For traders: be cautious about the correlation between the good-to-excellent rate and final yield—historically around 0.6-0.7, but in extreme weather years (e.g., 2011, 2022), deviations can exceed 15%. An option combination strategy is advisable to hedge upside risk.
Substitutes and Chain Linkages
If a US cotton production cut materializes, it will push international cotton prices higher, widening the domestic-international spread. This may lead to:
- A passive increase in the use of Xinjiang cotton domestically, but attention must be paid to the pace of sliding-duty quota issuance;
- A temporary strengthening of demand for substitute fibers like polyester staple fiber, prompting chemical fiber producers to adjust production schedules;
- Simultaneous raw material cost pressure on Southeast Asian spinners (Vietnam, Bangladesh), whose cotton yarn quotes may follow the uptrend.
Key Monitoring Points Ahead
The next four weeks are critical for US cotton growth. The industry should focus on:
- Weekly USDA crop progress reports, especially whether the good-to-excellent rate falls below 45%;
- The July WASDE report around July 12, for potential adjustments to the US cotton yield estimate;
- NOAA's updated temperature and precipitation forecasts for July-August.