The US cotton good-to-excellent rate fell to 44% in mid-July, down 10 percentage points from a year ago and marking the second consecutive weekly decline. For global cotton traders and downstream mills, this signals potential yield damage during the critical growing period and a tightening supply outlook.
Growth Indicators Diverge: Quality Drops but Development on Track
As of the week ending July 12, the US cotton good-to-excellent rate dropped to 44% from 46% the prior week, compared to 54% a year earlier. In just two weeks, the share of fields rated good or excellent fell by 4 percentage points, placing the current rate at a multi-year low for this period.
Other growth indicators, however, remain stable. The squaring rate reached 60%, up from 49% the previous week and in line with last year’s 59% and the five-year average of 59%. The boll-setting rate stood at 22%, matching both last year’s figure and the five-year average. This suggests the crop’s phenological development is not lagging; the problem lies more in boll quality and plant health—key determinants of final yield.
Weather Disruptions in Key Growing Regions
The consecutive decline in the good-to-excellent rate is primarily attributed to adverse weather in major producing states. Texas, Georgia, and the Mississippi Delta experienced high temperatures and localized drought from late June through early July. Although some rain arrived in mid-July, it came after the optimal window for early growth. For cotton in the flowering and boll-setting stages, water stress directly reduces boll weight and increases shedding rates.
Historical patterns suggest that each 1-percentage-point drop in the July good-to-excellent rate corresponds to a 0.5%-0.8% reduction in final yield. If the rate continues to fall in subsequent reports, the 2026/27 US cotton production estimate could face material downward revision. Given that the US is the world’s largest cotton exporter, any output shortfall will directly affect procurement costs and inventory strategies for major importers such as China, Vietnam, and Bangladesh.
Implications for the Supply Chain: Cotton Prices Find a Floor, Mills Feel the Squeeze
Following the USDA report, ICE cotton futures edged higher during Asian trading hours, reflecting initial market concerns over tighter supply. Cotton prices are still relatively low by historical standards, but the fundamental picture is shifting from “ample supply” to “balanced to tight.”
- For Chinese cotton textile mills, raw material cost pressure is building. In the first half of 2025, China imported approximately 850,000 tons of US cotton, accounting for over 35% of total imports. If US production cuts materialize, the cost of imported cotton will inevitably rise.
- For Southeast Asian mills, US cotton is the preferred raw material for high-count yarns and brand orders. If the premium for US cotton widens, some orders may shift to Indian or Brazilian cotton, though quality consistency and supply scale remain concerns for the latter two origins.
- For farmers and traders, this is a critical window to lock in forward sales. Basis quotes are likely to strengthen, giving traders holding physical inventories better bargaining power.
Key Factors to Watch
In the coming weeks, the market will closely monitor weekly USDA crop progress reports and the August WASDE report. Specific attention should be paid to:
- Whether the good-to-excellent rate falls below 40%: A third consecutive weekly decline could shift market sentiment from “cautiously bullish” to “clearly bullish.”
- Texas drought index changes: The state accounts for nearly 40% of US cotton output. Its rainfall and soil moisture data are more forward-looking than the national good-to-excellent rate alone.
- China’s import pace: The 2026 sliding-duty quota has been issued, but mills’ restocking decisions depend on the domestic-international price spread. If US cotton prices spike, substitution with domestic Chinese cotton will increase.