The US cotton good-to-excellent rate dropped sharply by 5 percentage points in a week, falling from 53% to 48%, below last year's 51%. This data point triggered a re-evaluation of supply quality for the 2026/27 season. On June 29, ICE December cotton futures edged up only 0.07 cents to 76.45 cents/lb, a gain of 0.09%, reflecting cautious positioning ahead of key reports.
Background
The main supports came from external markets: international oil prices rose over 1% due to US-Iran attacks, raising polyester fiber costs; the US dollar weakened for a third consecutive session, making dollar-denominated commodities cheaper for non-US buyers. However, the sustainability of these factors is questionable—energy shipments through the Strait of Hormuz are resuming, capping oil upside, while the dollar's direction remains tied to Fed policy expectations.
Meanwhile, US cotton planting is nearly complete, reaching 97% by June 28, slightly above last year's 95% and in line with the five-year average. This suggests that the key variable for supply is no longer acreage but yield and quality. The sharp drop in the good-to-excellent rate indicates potential adverse weather in major growing regions, which will materially impact harvested grades and staple lengths.
Industry Impact
For Chinese textile mills, deteriorating US cotton quality expectations require proactive procurement adjustments. On one hand, premiums for high-grade cotton may widen, raising import costs. On the other hand, if the upcoming USDA planting report shows less-than-expected acreage growth combined with quality downgrades, ICE futures could face upward pressure. Speculators have already increased net longs by 7,247 lots to 58,252, signaling bets on tightening supply.
Globally, forecaster Vaisala estimates 2026/27 world cotton output at 119.27 million bales, which needs verification against USDA official data. If actual production falls short, international cotton prices may trend higher, widening the domestic-international spread and affecting China's competitiveness in yarn and gray fabric exports.