The US cotton good-to-excellent rate dropped sharply by 5 percentage points in a single week to 48%, not only below the previous week's 53% but also below last year's 51%. This figure directly ignited bullish sentiment in the futures market, with the Zhengzhou Cotton main contract (2609) closing at 16,070 yuan/ton on June 29, up 210 yuan from the previous trading day, accompanied by expanding volume and open interest.
The market is now repricing expectations for the new-crop US cotton production. A good-to-excellent rate below the 50% threshold means that without significant weather improvement in the coming weeks, a downward revision in yields is almost certain. For textile mills, the raw material cost fluctuation is shifting from expectations to reality.
Growing Conditions and Crop Progress
Looking at the growth cycle, as of June 28, the US cotton squaring rate was 37%, slightly below last year's 38% but roughly in line with the five-year average of 36%. The boll-setting rate was 9%, close to last year's 8% and the five-year average of 9%. With planting at 97% and nearly complete, the key variable for final production now rests entirely on yields.
The decline in the good-to-excellent rate is not an isolated event. Over the past two weeks, major US cotton-producing areas, especially Texas, experienced hot and dry weather, leading to rapidly deteriorating soil moisture. Some fields have already shown leaf curling and boll shedding due to water stress. Without effective rainfall in the next two weeks, the good-to-excellent rate could decline further.
Futures Market Capital Flows
The Zhengzhou Cotton main contract had been consolidating around 16,000 yuan/ton for nearly two weeks. The good-to-excellent rate data became the catalyst to break the stalemate. The price increase on June 29, accompanied by rising open interest, suggests that long capital is not short-term speculative but rather active allocation based on fundamental improvement. The sustained high open interest indicates that divergence between bulls and bears persists, but the balance is tilting toward the supply side.
From an internal-external price spread perspective, ICE cotton futures also rebounded during the same period, but with less magnitude than Zhengzhou Cotton. The key question for domestic textile mills is whether this rally is a temporary sentiment release or the start of a trend reversal. The answer depends on the trajectory of the US cotton good-to-excellent rate next week. If the data continues to decline, 16,000 yuan/ton could become a new support level.
Impact on Downstream Procurement
For spinning mills and weaving enterprises, rising cotton prices directly compress processing margins. Current cotton yarn prices are lagging behind, leaving mills facing a "raw cotton up, yarn unchanged" squeeze. Some small and medium-sized mills have already slowed procurement, waiting for market sentiment to stabilize before making decisions.
However, it is worth noting that if the expectation of a US cotton production cut is confirmed, the landed cost of imported cotton will systematically increase. For coastal mills reliant on imported cotton, locking in a portion of forward cargoes early may be a more prudent choice. The current futures spread between nearby and deferred contracts is still flat, with limited premium for deferred months, providing a window of opportunity for buyers.