The U.S. cotton belt is undergoing a severe drought test. According to the latest Agricultural Drought Monitoring data released by the U.S. Department of Agriculture (USDA), as of July 7, 2026, 55% of U.S. cotton-growing areas are experiencing drought, a staggering increase of 52 percentage points compared to only 3% in the same period last year. Although this marks a slight 1 percentage point decrease from the previous week's 56%, such a high drought coverage rate at this time of year is enough to force the global cotton supply chain to reassess the supply outlook for the second half of the year.
The most direct feedback on this data has already appeared in the domestic futures market. The main Zhengzhou Cotton contract for September 2026 closed at 15,930 yuan per ton on July 9, with market sentiment clearly leaning bullish. The logic of reduced production driven by drought expectations is transmitting from the production areas to the pricing end.
Substantial Impact of Drought on Production
The sharp increase in the drought ratio in U.S. cotton areas is not just a numerical warning. Cotton is extremely sensitive to water demand during its flowering and boll-setting stages, and the current early July is a critical growth period. Persistent drought will directly lead to lower yields and damaged fiber quality. A 55% drought coverage rate means that more than half of the planted area faces the risk of reduced production. Even if later rainfall can partially alleviate the situation, the growth delays already caused are difficult to fully compensate for.
Historical experience shows that in 2022, U.S. cotton areas also suffered severe drought, with the drought ratio once exceeding 60%, leading to a roughly 20% year-on-year decline in U.S. cotton production that year and triggering a sustained rise in global cotton prices. Although the current drought has not yet reached that year's extreme, the magnitude of the year-on-year increase has already caused substantial market concern about the 2026/27 U.S. cotton output. As the world's largest cotton exporter, fluctuations in U.S. production directly affect the raw material costs of major textile importing countries such as China, Vietnam, and Bangladesh.
For Chinese textile enterprises, this means the procurement cost of imported cotton may shift upward. Although the main Zhengzhou Cotton contract is currently fluctuating around 15,900 yuan per ton, if the drought persists or intensifies, the upward price space will be further opened. Especially for mid-to-high-end fabric and yarn producers who rely on U.S. cotton, the pressure from raw material costs will directly test their profit margins.
Industrial Chain Transmission and Price Expectations
The expectation of reduced production due to drought is gradually seeping from the upstream lint cotton market to the downstream yarn and fabric sectors. The domestic cotton spot market is currently in a wait-and-see state, but the bullish signal from the futures market has provided clear inventory management guidance for traders and textile mills.
From a supply-demand balance perspective, the global cotton market for the 2025/26 season was already in a tight balance, with China's import demand remaining strong. If the expectation of reduced U.S. cotton production materializes, global ending stocks will tighten further, and the strength of foreign cotton prices will drive up domestic cotton prices in tandem. For textile enterprises, this means that the procurement window in the coming months may be narrowing.
- For spinning mills: Rising raw material costs will compress processing profits, especially for regular varieties like 32s and 40s, which may face upward price pressure.
- For fabric suppliers: If cotton prices continue to rise, downstream apparel brands may delay order placements, creating short-term demand suppression.
- For foreign trade companies: The rise in U.S. dollar-denominated U.S. cotton prices, coupled with RMB exchange rate fluctuations, makes it more difficult to quote export orders.
Practical Recommendations
For Purchasers - It is recommended to build raw material inventories in batches when the main Zhengzhou Cotton contract is below 16,000 yuan per ton to avoid price risks from centralized procurement. - Monitor the USDA's weekly drought monitoring reports; if the drought ratio remains above 50% for three consecutive weeks, accelerate the procurement pace. - Consider increasing the procurement ratio from alternative origins such as Brazilian cotton or Indian cotton to diversify the supply risk from the U.S.
For Textile Enterprises - For long-term customers, it is advisable to include a raw material price floating clause in contracts to transfer part of the cost risk downstream. - Utilize futures hedging tools by establishing appropriate short positions in the main Zhengzhou Cotton contract to offset potential upside risks from spot procurement. - Optimize product structure by appropriately increasing the proportion of chemical fiber blended products to reduce dependence on pure cotton raw materials.
Overall, the U.S. cotton drought event is evolving from a climate anomaly into a core variable affecting global textile supply chain pricing. Textile enterprises should abandon wishful thinking, base decisions on actual data, and prepare raw material cost management in advance.