US cotton spot market is experiencing a significant price revaluation. For the week ending August 6, the average spot price for benchmark quality cotton in seven designated markets rose 245 points from the previous week to 76.15 cents per pound, nearly 7 cents higher year-over-year. More notably, spot transactions surged to 3,508 bales from 817 bales the prior week, more than tripling year-over-year. Behind this price-volume surge lies a fierce tug-of-war between supply-side weather disruptions and demand-side purchasing rhythms.
Market Background
The direct driver of price increases is extreme weather in major producing areas. Eastern and southern Texas experienced persistent high temperatures, with daily highs commonly above 90°F and some areas exceeding 100°F, with rainfall under 0.25 inches. In West Texas, after two consecutive weeks of extreme heat, some cotton plants have wilted and deteriorated, raising the risk of yield losses in dryland fields. Southwestern Oklahoma is even expected to trigger crop insurance claims. In contrast, the Southeast received widespread thunderstorms, with 1-3 inches of rain in Georgia, Alabama, and other areas, effectively alleviating drought and accelerating boll development—Georgia reached 63% boll setting, Alabama 67%, and North Carolina 76%.
Weather divergence is directly reflected in futures markets. ICE October cotton futures settled at 81.96 cents per pound, up 2.55 cents from the previous week. Futures trading at a premium to spot suggests market pricing for tighter future supply. However, daily spot prices fluctuated between 75.29 and 76.75 cents, with limited weekly range, indicating lingering doubts about price sustainability.
Industry Impact
Supply-side contraction expectations are transmitting downstream. Domestic textile mills remain cautious but have begun purchasing medium-grade cotton for October-December delivery and inquiring about forward resources for Q1-Q4 2027. Yarn demand is slow to moderate, with mills reluctant to build large inventories at high prices. Export channels are more active, with agents from South Korea, Vietnam, and Bangladesh inquiring for various grades of US cotton, with shipment concentrated in September-October and nearby months. This temperature difference between domestic and export demand reflects the global textile chain's divergent acceptance of high raw material costs.
For buyers, current prices are at two-year highs, and the risk of chasing rallies cannot be ignored. On one hand, if Texas drought persists in August, further yield downgrades would support prices. On the other hand, global textile and apparel consumption recovery remains weak, yarn prices are struggling to follow, and weaving enterprises' profit margins are compressed, potentially forcing demand-side cutbacks or shifts to alternative fibers. Historical experience shows weather premiums are often partially retraced before harvest. Therefore, managing procurement rhythm is more practical than predicting prices.