The ongoing heatwave in US cotton-growing regions and the Middle East geopolitical conflict are reshaping the short-term pricing logic of the cotton market. On July 13, the ICE December cotton futures settled at 81.51 cents per pound, down a marginal 0.04% from the previous session, but found significant intraday support. This reflects a tug-of-war between two forces: deteriorating crop quality on the supply side and upwardly revised global production estimates on the demand side.
Short-Term Support: Weather and Geopolitics
The USDA's weekly crop progress report showed that as of July 12, the US cotton good-to-excellent rate stood at only 44%, down 2 percentage points from the prior week and 10 percentage points lower than the same period last year. West Texas, the nation's most important cotton-producing region, is experiencing persistent high temperatures and drought, directly threatening boll development. A vice president at Price Futures Group noted that the hot weather in the Great Plains provided major support for cotton prices that day.
Simultaneously, tensions escalated in the Middle East. The US announced a naval blockade of Iranian ports, raising the risk of disruptions to energy shipments through the Strait of Hormuz and triggering a 9% jump in oil prices. Higher oil prices directly increase production costs for polyester fiber, making cotton more competitive through substitution effects. For textile mills, this means cost pressure from chemical fibers may spill over into cotton prices.
Notably, the US dollar index edged up only slightly that day, limiting its bearish impact on cotton prices. ICE deliverable stocks fell to 127,127 bales from 158,607 bales the previous trading day, indicating weaker willingness to deliver in the spot market and providing some support for futures prices.
Long-Term Supply-Demand: Production Increases Loom
Despite the concentration of short-term bullish factors, the market is not without concerns. The USDA's July World Agricultural Supply and Demand Estimates report raised US cotton production for the 2026/27 marketing year by 400,000 bales to 13.7 million bales, with global supply estimates also raised by 300,000 bales. This suggests that beyond weather disruptions, total new-crop supply remains tilted toward abundance.
From an industrial chain perspective, current futures prices around 81 cents per pound equate to roughly 90% of the Cotlook A Index of 90.70 cents per pound. For Chinese cotton textile mills, if the domestic-import price spread continues to narrow, the window for import purchases may reopen. However, caution is warranted: if the US good-to-excellent rate continues to decline during the critical August growing period, the production increase expectations could be revised downward.