The US cotton spot market is displaying a rare divergence between rising prices and shrinking volume. In the week ending July 16, the average price for base quality cotton across seven designated markets rose 99 points to 73.97 cents/lb, up 14.7% year-on-year from 64.50 cents/lb. Yet spot sales totaled only 604 bales, down 65% from the prior week’s 1,732 bales and 83% from last year’s 3,582 bales. This divergence signals a clear disagreement between buyers and sellers on current valuations.
Regional Divergence Behind Price Rally
From a production perspective, the Southeast and Southwest are experiencing contrasting growing seasons. In the Southeast, Georgia and Alabama reported boll formation rates of 20% and 34%, respectively, with most fields rated “good.” In contrast, the Southwest—Texas, Kansas, and Oklahoma—faces multiple pressures: heavy rainfall and flooding in parts of East and South Texas, large populations of stink bugs, and boll damage reported in the Coastal Bend area. Dryland fields in West Texas urgently need moisture, while irrigated fields are progressing well but have shown signs of square shedding.
This divergence means that new-crop quality and yield will vary significantly by region. If favorable weather continues in the Southeast, it could supply early high-grade cotton; meanwhile, persistent pests and drought in the Southwest may increase the proportion of lower-grade cotton, potentially dragging down the overall spot average.
Downstream Buying Turns Cautious
Mill buying patterns confirm this cautious outlook. Domestic mills have only made moderate inquiries for October-December 2026 delivery, specifying color grade 42 and above, leaf grade 4 and above, and fiber length 35 and above—but no actual trades were reported. Export demand is moderate, but Far East agents are only interested in discounted varieties.
This is a key signal: as spot prices rise rapidly, downstream buyers are not chasing the rally but instead waiting or shifting to forward contracts. ICE December futures fell 2.25 cents on Thursday to 79.30 cents/lb, further indicating market skepticism about the sustainability of the spot uptrend. For Chinese buyers, the current premium on US cotton spot may not be sustainable, and a price correction should be anticipated.
Implications of the Volume Plunge
A weekly volume of 604 bales is among the lowest for this period in recent marketing years. Total spot volume for the marketing year to date stands at 1,522,630 bales, still above last year’s 987,565 bales, but the growth rate has clearly slowed. Shrinking volume usually means tightening liquidity and a widening gap between buyer and seller price expectations.
On the supply side, producer offerings are very scarce, especially in the Southwest, where growers show little interest in forward contracting. CCC loan collateral cotton trading is also light, suggesting farmers prefer to hold for higher prices. On the demand side, finished product demand is slow to moderate, and mills remain cautious in balancing raw cotton purchases with order books, unwilling to build inventories at elevated prices.
This supply-demand stalemate may keep prices high and volatile in the near term, but once new-crop supply expectations become clearer, a sharp downward correction is possible.