US Cotton Quality Rate Drops Below Five-Year Average, Zhengzhou Cotton Futures Show Limited Upside

The quality rate of US cotton dropped significantly in mid-July, falling 2 percentage points to 44%, and is notably lower than last year's 54%. This indicates adverse weather or pest impacts in key growing regions, forming supply contraction expectations.

Background

The USDA weekly crop progress report shows that as of July 12, the US cotton quality rate was only 44%, down from 46% the previous week and below the five-year average. Squaring rate reached 60%, slightly above last year's 59% and the five-year average of 59%; boll-setting rate was 22%, consistent with last year and the five-year average.

These figures reveal a core contradiction: quality rate weakening but growth progress normal. Squaring and boll-setting rates align with historical averages, indicating the overall growth rhythm has not been disrupted, but plant health is concerning. For the textile industry, this directly impacts final yield per acre and cotton grade distribution.

Industry Impact

From the supply side, the declining quality rate implies downside risk for 2026/27 US cotton production. Historically, each 1% drop in quality rate may reduce yield by 1-2%. If the trend continues, total US cotton output could decrease by 50,000-80,000 tons, directly impacting global cotton trade patterns.

However, bullish momentum is limited. Normal squaring and boll-setting rates suggest no large-scale growth stagnation or shedding. If weather improves, quality rate could rebound. Market reaction has been restrained—Zhengzhou cotton futures rose only 70 yuan/ton to 16,080 yuan/ton, a gain of less than 0.5%.

For domestic textile enterprises, US cotton supply contraction expectations directly affect imported cotton costs. In the first half of 2026, China imported approximately 800,000 tons of US cotton, accounting for over 35% of total imports. If US cotton production falls, import prices may rise, pushing up raw material costs for the domestic cotton textile chain. However, weak downstream demand remains the main contradiction, with insufficient end orders leading to low purchasing willingness, limiting price transmission to yarn and fabric sectors.

Practical Advice

For Purchasers - Increase US cotton procurement moderately in the short term to lock in relatively low prices, hedging against potential price increases from production cuts - Monitor weather conditions in major US growing areas in July-August; if drought or high temperatures persist, quality rate could worsen, requiring advance stockpiling - Negotiate floating price contracts with suppliers to retain room for price corrections and avoid chasing highs

For Foreign Trade Enterprises - Under US cotton production cut expectations, exports to European and American markets may face rising raw material costs; include cost fluctuation clauses in order quotes - Monitor price spreads between Zhengzhou cotton and ICE cotton futures, using hedging tools to manage imported cotton price volatility - If US cotton quality declines due to poor growth, adjust product specifications and procurement standards in advance to avoid failing to meet customer requirements upon arrival