55%—that's the share of U.S. cotton-producing areas under drought as of July 7, 2026. This figure represents a staggering 52-percentage-point year-on-year increase, meaning nearly one in every two acres of cotton farmland is currently facing water stress. Although down one percentage point from the previous week, such an annual surge is rare in the past decade of U.S. cotton production and has already sent ripples through global textile procurement.
Drought Coverage in Historical Context
According to the latest USDA Agricultural Drought Monitor data, the drought ratio in U.S. cotton areas stood at 55% as of the week ending July 7, compared to just 3% a year earlier. In absolute terms, the current drought severity is approaching the extreme levels seen in 2011, when widespread crop failure in Texas pushed international cotton prices above $2 per pound.
Importantly, this drought did not emerge suddenly. Over the past four weeks—54%, 56%, 55%, 55%—the ratio has remained elevated near 55%, without the typical rapid summer relief. This suggests soil moisture during the critical growth period (July-August) will likely stay low, directly impacting yield expectations.
Transmission to Futures and Cash Markets
Yield concerns have already been priced into futures. The Zhengzhou Cotton Exchange's main 2609 contract closed at 15,930 yuan per tonne on July 9, up about 3% from its mid-June low. Historically, for every two weeks of sustained drought in the U.S. cotton belt, the ICE December contract tends to rise 4%-6%, with the Zhengzhou contract following by about 60%-70%. If the drought persists through late July, the main contract could test the 16,300 yuan mark.
On the cash side, most textile mills currently hold 30-45 days of raw material inventory, a moderately low level. Once yield expectations shift from futures to physical basis, traders' willingness to hold stocks will increase, potentially pushing yarn and grey fabric prices higher.
Regional and Grade Variations
Among U.S. cotton regions, West Texas is the most severely affected, accounting for over 40% of national production and dominated by high-quality SJV and M grades. This means the supply gap for high-grade cotton may be more pronounced than the overall production decline. For fabric buyers sourcing premium yarns, locking in high-grade U.S. cotton early is advisable to avoid a "price with no stock" scenario in the second half of the year.
In contrast, the Southeast region (Georgia, Alabama) shows a drought ratio of about 35%, below the national average. These areas primarily produce mid-to-low-grade cotton, which remains relatively abundant. Thus, the drought's impact on the textile chain will be structurally uneven: tight for high-end grades, balanced for mid-range.