US Cotton Good-to-Excellent Rate Drops to 44%: Can Supply Contraction Expectations Support Zheng Cotton Rebound?

The US cotton good-to-excellent rate dropped to 44%, sounding an alarm for the new season's supply. According to the USDA weekly crop progress report for the week ending July 12, the rate fell 2 percentage points from the previous week and was significantly lower than last year's 54%. This not only indicates weaker growth conditions but also triggered a chain reaction in Zheng Cotton futures, with the main 2609 contract closing at 16,080 yuan per ton on July 13, up 70 yuan from the previous day.

Background

The decline in the good-to-excellent rate is not an isolated event. In terms of the crop growth cycle, the squaring rate reached 60% and the boll-setting rate 22% as of July 12, both in line with the five-year average. This means that while growth progress is not delayed, quality is diverging. Industry data show that 44% is among the lowest for this period in the past five years, only above 42% in 2023 and well below 54% in 2024.

The potential supply contraction is the core logic driving the price uptick. For Chinese textile mills, US cotton is a key source for import blending, especially for high-count yarns and premium fabrics where alternatives are limited. Any downward revision in US production expectations will directly raise import costs, impacting domestic cotton yarn and grey fabric prices.

Industry Impact

From an industrial cluster perspective, the Xinjiang cotton region is currently in the flowering and boll-setting stage with generally good growth. However, market attention has shifted to the supplementary role of imported cotton. According to China Customs data, imports of US cotton in the first half of 2026 increased by about 15% year-on-year. If US production expectations are lowered, import costs may rise in the second half, squeezing spinners' margins.

Looking at the upstream-downstream transmission chain, the positive impact of higher cotton prices is first felt by ginners and traders. As Zheng Cotton futures strengthened, spot prices rose, with some holders becoming reluctant to sell. However, downstream weaving and apparel companies remain cautious. The current off-season means orders are mostly short-run and small-lot, with fabric buyers unwilling to take on raw material price risks and preferring to buy hand-to-mouth.

It is worth noting that the bullish support from the declining good-to-excellent rate is not unlimited. The squaring and boll-setting rates are in line with averages, suggesting a low probability of a sharp drop in yield. The PriceSeek sentiment score of 1 out of 10 also implies the market should be rational about this bullish factor. Weather remains the key variable. If the core boll-setting period in July and August sees adequate rainfall in major producing areas, the good-to-excellent rate could recover, quickly dissipating the supply contraction expectations.

Practical Recommendations

For Buyers - Increase import cotton procurement moderately to lock in current prices, but avoid overstocking. Closely monitor weather forecasts for major US producing areas. - Sign floating-basis contracts with suppliers to partially transfer price risk, and use Zheng Cotton futures for hedging. - Optimize the cotton blend by increasing the share of Xinjiang and Brazilian cotton to reduce dependence on a single source.

For Foreign Trade Enterprises - Settle existing orders promptly to hedge against the dual risks of RMB exchange rate fluctuations and cotton price volatility. - When communicating with overseas clients, cite USDA good-to-excellent rate data as objective evidence of cost increases to negotiate price adjustments. - Watch for the USDA August supply and demand report, which will for the first time revise yield and total production forecasts based on field surveys, a key milestone for judging the annual supply pattern.