The US cotton spot market is experiencing a weather- and inventory-driven surge. In the week ending August 6, the average spot price for base quality cotton in seven designated markets rose 245 points to 76.15 cents/lb, the largest weekly gain this year. Spot transactions jumped to 3,508 bales, more than four times the previous week's 817 bales and well above last year's 1,066 bales. This suggests the spot market is seeing real trading activity, not just higher quotes.
Market Background
The price jump is directly tied to persistent heat and drought in West Texas. Daytime highs exceeded 100°F in many areas, with no meaningful rainfall for two weeks. Some dryland fields are already showing boll shed and top flowering, raising yield loss risks. The US Drought Monitor shows worsening conditions, and southwestern Oklahoma has started crop insurance claims due to irrigation shortages. This is systematically lowering production expectations for the 2026 crop, and supply concerns are transmitting from futures to spot quotes.
Meanwhile, the Southeast presents a contrasting picture. Alabama, Georgia, and the Carolinas received 1-3 inches of rain, easing drought and improving crop conditions. Boll setting progress ranges from 60% to 76%. This east-west divergence complicates overall production estimates—higher output in the Southeast may partially offset Western losses, but quality distribution will tighten supplies of high-grade cotton.
Industry Impact
The price rise benefits traders and growers holding inventories. More notably, the ICE October contract settled at 81.96 cents/lb, up 2.55 cents from the prior week, narrowing the spot-futures spread to 5.8 cents. This suggests futures have already priced in some weather premium. If drought persists, spot may converge toward futures; if rains return, spot could correct downward, dragged by futures. For buyers, locking prices now becomes more sensitive.
Mill buying remains cautious. Domestic mills purchased moderate quantities of color grade 42/51, staple 34 and longer, for October-December delivery. Inquiries for high-grade (color 41, staple 38) were moderate but no trades were reported. Export demand is moderate, with Korean, Vietnamese, and Bangladeshi buyers inquiring but mostly standing aside. Yarn demand is slow to moderate, and mills prefer to keep inventory lean when prices rise quickly, limiting further upside.
Regionally, South Texas is harvesting, with the Rio Grande Valley expected to produce well, while West Texas faces early harvest with reduced yields. This will likely widen the quality spread—high-grade cotton (color 31/41) may tighten, while lower grades remain available. Mills spinning fine counts will face higher raw material costs.