On July 13, 2026, the ICE cotton futures market saw the most-active December contract settle at 81.51 cents per pound, a mere 0.03-cent decline that belied intense crosscurrents beneath the surface. Two opposing forces—scorching heat across key US growing regions and a geopolitical oil spike from Middle East tensions—combined to form the price floor.
Weather Factor: Declining Crop Conditions Put Texas in Focus
The latest USDA weekly crop progress report showed the US cotton good-to-excellent rating falling to 44% for the week ending July 12, down from 46% the prior week and well below the 54% recorded a year ago. This deterioration points to stress during the critical growth phase, particularly in the Southern Plains, where West Texas—the nation's largest cotton-producing region—has been suffering from persistent heat and limited rainfall. For textile buyers, this signals a potential shortage of high-grade cotton when the new crop arrives, likely widening premiums for top-quality bales.
Geopolitical Variable: US-Iran Conflict Lifts Oil, Indirectly Supports Cotton
On the same day, crude oil prices surged over 9% to a one-month high after the Trump administration announced a naval blockade covering Iran's entire coastline, ports, and oil terminals, reigniting fears over energy shipments through the Strait of Hormuz. Higher oil prices raise the production cost of polyester—cotton's main synthetic substitute—making cotton more competitive on a relative cost basis. This dynamic helps explain why cotton held above 81 cents despite a stronger US dollar and a bearish supply-demand backdrop.
Supply-Demand Fundamentals: US Production Raised, Global Surplus Expected
The USDA July WASDE report added a bearish note, raising the 2026/27 US cotton production estimate by 400,000 bales to 13.7 million bales and lifting the global supply forecast by 300,000 bales. This production increase appears at odds with the declining good-to-excellent ratings, but the discrepancy reflects expanded acreage and baseline yield assumptions that are not fully captured by weekly condition reports. Additionally, ICE deliverable stocks dropped sharply from 158,607 bales to 127,127 bales, a nearly 20% decline that some may interpret as firmer spot demand. However, this more likely reflects the unwinding of hedge positions and certificate retirements rather than a genuine pickup in mill buying.