US cotton spot market is at a delicate juncture: prices climb while volumes shrink. In the week ending August 13, the average quote for base quality cotton across seven designated markets was 77.71 cents/lb, up 156 points from the prior week and over 14 cents higher year-on-year. However, spot trading volume fell to 2,471 bales, down nearly 30% from the previous week and 40% from a year ago. This divergence suggests the rally is driven more by supply expectations than actual demand.
Weather and Yield: Uneven Rains, Rising Abandonment
Weather impacts diverged sharply across regions. The Southeast received widespread thunderstorms, with Alabama and Georgia getting 1-3 inches of rain, replenishing deep soil moisture. Cotton squaring rates reached 78% in Alabama and 77% in Georgia, with boll opening ahead of normal. However, parts of southern Alabama remained dry, stressing crops. In Texas, hot and dry conditions persisted, with daytime highs of 95-105°F. Only isolated showers fell on the northern High Plains, too late for drought-stricken dryland fields, raising abandonment expectations and lowering yield forecasts. This east-wet/west-dry pattern suggests regional output disparity and tighter supply of high-quality cotton.
Demand: Mills Cautious, Export Inquiries Focus on High Grade
Domestic mills reported no inquiries or transactions, having secured near-term supplies, with finished product demand weak to moderate. Export demand was also weak to moderate but structurally telling: agents from Thailand, South Korea, and Vietnam inquired for US green card cotton (color 31, leaf 3, staple 37) for Sep-Oct shipment, while interest in discounted cotton from the Far East was minimal. This indicates overseas buyers prioritize quality stability over price, widening the premium for high-grade cotton.
Futures and Spot: Cost Pressure Emerges
ICE October cotton futures settled at 82.36 cents/lb on Thursday, up 0.4 cents week-on-week, in sync with spot. The futures premium of about 4.65 cents reflects market pricing of tighter future supply. For textile mills, this means a notably higher procurement cost—roughly $600 more per ton compared to a year ago. If the rally continues, downstream yarn and fabric prices will likely follow, but whether end demand can absorb the increase remains uncertain.
Industry Impact: Procurement Window and Risks
In summary, the US cotton market is caught between a weather premium and weak demand. In the short term, Texas drought and Southeast pests may support prices; but sluggish spot volumes and well-stocked mills cap upside. For Chinese textile enterprises, two risks warrant attention: first, if abandonment expands, high-grade supply gaps may emerge after mid-autumn; second, if ICE breaks above 83 cents/lb, speculative buying could accelerate, further raising import costs.