US cotton quality ratings dropped another 2 percentage points in a week to 44%, widening the gap from last year's 54%. For the global textile chain, this signals tightening supply of high-grade cotton from the US, the world's largest exporter. The Texas Panhandle, America's key cotton belt, is suffering from persistent heat, narrowing the crop development window.
Weather vs. Production: A Dual Supply Risk
USDA's weekly crop progress report for July 12 showed cotton quality falling from 46% to 44%, versus 54% a year ago. Persistent heat and drought in Texas directly impact boll development and yield potential. Analysts at Price Futures Group noted that the hot weather across major growing regions, especially Texas, provided key support for cotton prices this week.
Meanwhile, USDA's July WASDE report raised 2026/27 US cotton production by 400,000 bales to 13.7 million bales. This apparent contradiction—higher output but lower quality—reflects a battle between expanded acreage and falling yields. For mill procurement decisions, declining quality ratings mean fewer high-grade bales available for delivery, likely steepening the forward curve.
Geopolitics and Substitutes: A New Cost Channel
Sudden escalation in the Middle East added fresh uncertainty. The US announced a naval blockade of Iranian ports, reviving fears over Strait of Hormuz energy shipments and sending oil prices up 9% in a single day. Surging crude directly raises the production cost of polyester fiber—cotton's main substitute—making cotton more competitive and providing indirect price support.
ICE data showed deliverable cotton stocks fell to 127,127 bales as of July 10, down sharply from 158,607 bales the previous week. Rapid inventory drawdown combined with geopolitical risk premiums suggests prices are prone to upside moves in the near term. However, a strengthening US dollar caps export competitiveness, leaving the market in a narrow range.
Spot Market: Cotlook A Index Edges Up
On the spot side, the Cotlook A Index rose 95 points to 90.70 cents/lb on July 13. The futures-spread of about 9 cents reflects steady demand for high-grade cotton, but buyers remain cautious on forward pricing.
From an industry perspective, falling US quality ratings will first impact the basis quotes for the 2026/27 crop. For major importers like China, Vietnam, and Bangladesh, tighter high-grade supply means higher sourcing costs, potentially shifting demand toward Brazilian or West African cotton.