On August 14, the most-active ICE December cotton futures contract settled at 84.80 cents per pound, up 1.56% on the day and roughly 0.5% for the week, marking the fourth consecutive weekly gain. The rally is underpinned by delayed positive reaction to robust US export sales and persistent drought in key growing regions. For the textile value chain, the higher cotton price signals that raw material cost pressures are transmitting from futures to physical markets and downstream sectors, making procurement timing more critical than ever.
Background
The latest USDA export sales report showed net sales of 904,989 bales of US upland cotton for the 2026/27 marketing year in the week ended August 6, far exceeding market expectations. Meanwhile, sales for the 2025/26 season were 1,265 bales, and for 2027/28, 19,369 bales. Shipment data also drew attention: 67,923 bales were shipped in the week ending July 31, while shipments from August 1-6 reached 140,451 bales, more than doubling week-over-week. These figures indicate strengthening export momentum for the new crop year, with notable interest in forward contracts.
Market participants noted that the latest rally partly reflects a delayed reaction to the USDA report released earlier in the week. Prices initially rose after the report, then pulled back, only to recover on August 14. This two-steps-forward, one-step-back pattern suggests funds are alternating between absorbing bullish news and watching weather developments. The fact that sales span two marketing years implies international buyers are both locking in old-crop supplies and positioning for new-crop availability, which is reshaping the term structure of prices.
Industry Impact
Weather is another major driver. Persistent high temperatures and scarce rainfall across the US South have subjected crops to severe drought stress. Industry assessments indicate that extreme weather could directly threaten yields, tightening global cotton supplies. With expectations of a strong El Niño this year, global rainfall distribution may shift significantly, meaning the weather premium is unlikely to fade soon and could even intensify. For textile mills, this “weather premium” is squeezing profit margins, especially for those relying heavily on US cotton.
From a market structure perspective, ICE deliverable No.2 cotton futures stocks stood at 75,985 bales on August 13, down 1,779 bales from the previous session, indicating weak physical delivery intentions and a preference to hold contracts rather than take delivery. This combination of declining stocks and rising prices is typically interpreted as market expectations of tighter supply ahead. Meanwhile, a weaker US dollar and rising oil prices provided additional support for dollar-denominated cotton. However, a surprise drop in US July retail sales signaled weak end-consumer demand, which may cap upside potential.
For China’s textile industrial clusters, stronger US cotton directly raises imported cotton costs, widening the domestic-import spread. Fabric manufacturers in Keqiao and Shengze that use US cotton must closely monitor exchange rate movements and shipping schedules, while the Nantong home textile cluster may face delayed price pass-through to end orders. More profoundly, if weather issues persist and US production forecasts are downgraded, global pricing power in the cotton-textile chain could shift further toward the supply side.