Cotton prices are being lifted by two forces simultaneously: stronger-than-expected export sales and extreme weather in key growing regions. On August 14, ICE December cotton settled at 84.80 cents per pound, up 1.56% on the day, marking a fourth consecutive weekly gain. This move is not an isolated event but a typical signal in the global supply-demand rebalancing process—demand has not collapsed, while supply-side fragility is being amplified by weather.
Export Data Reveal Real Demand
The USDA weekly export report showed net sales of 905,000 bales for the 2026/27 marketing year in the week ending August 6, far exceeding market expectations and explaining why the market retained upward momentum two days after the report. Notably, net sales for 2025/26 and 2027/28 were 1,265 and 19,369 bales respectively, indicating buyers are locking in both nearby and forward supplies. Shipment data also deserve attention: old-crop shipments through July 31 were 67,923 bales, while new-crop shipments from August 1-6 reached 140,451 bales—more than doubling in two weeks, suggesting accelerated physical offtake.
For buyers, the implication is clear: US cotton is not losing orders despite higher prices, and concentrated contracting is occurring even in the traditional off-season. This means global mills still have rigid demand for high-grade cotton, particularly as spinning mills in Southeast Asia and South Asia build inventories for autumn/winter orders. However, be cautious that a surge in export sales may include some speculative buying, raising the risk of contract cancellations if prices correct.
Weather Premium and El Niño Chain Reaction
The other driver is persistent extreme heat and drought in the US South. Meteorological models show temperatures in key regions like Texas have repeatedly exceeded historical averages, soil moisture continues to deteriorate, and crops are in the critical boll-setting period. If this stress persists into harvest, lower yields become almost certain. Market participants acknowledge that weather is injecting a risk premium into cotton prices, which is unlikely to fade quickly.
A larger variable is El Niño. Expectations of higher intensity mean global rainfall patterns will be disrupted, potentially affecting not only the US but also India, Pakistan, and other major northern-hemisphere producers. For the textile chain, this sends a clear signal: raw material cost uncertainty is rising. Spinners and weavers need to reassess inventory strategies; excessively lean raw material stocks could backfire in a weather-driven market.
Macro and Inventory Effects
The rally is not isolated from the macro environment. A weaker dollar and disappointing US retail sales provided additional support for dollar-denominated commodities. Meanwhile, ICE deliverable stocks continued to decline—75,985 bales as of August 13, down about 1,800 bales from the prior day—amplifying price elasticity. Additionally, CBOT soft red winter wheat surged over 3%, lifting sentiment across the agricultural complex and providing spillover support to cotton.
For traders, this market structure implies wider basis fluctuations. The Cotlook A index stood at 94.05 cents per pound, a premium of about 9 cents over futures, indicating tight physical supply. Foreign trade companies with forward orders should guard against cost pressure from further price increases and consider locking in some supply when basis levels are reasonable.
Outlook and Operational Strategies
In the near term, cotton prices are likely to remain firm and volatile. Export data has been partially digested, but weather speculation is not over; any new drought warning could push prices higher. In the medium term, focus on Fed policy and the dollar—if rate cut expectations rise, a weaker dollar will continue to support cotton; conversely, risk-off events could trigger a quick correction.