US cotton spot prices averaged 77.71 cents/lb in the week ending Aug 13, up 156 points from the prior week and 22.8% higher year-on-year. However, spot transactions totaled only 2,471 bales, down nearly 40% from a year ago. This divergence between price and volume reveals a cautious market: sellers hold back amid weather concerns, while buyers hesitate at current levels. For Chinese textile mills, imported cotton costs are unlikely to drop soon, but panic buying is unnecessary given the thin trading activity.
Price and Volume Divergence
Daily spot prices ranged narrowly between 78.01 and 77.15 cents/lb during the week, with the high on Aug 7 and the low on Aug 13. ICE October futures settled at 82.36 cents/lb, up 0.4 cents from last Thursday. The futures-spot spread of about 4.65 cents is relatively wide, suggesting the spot premium is driven by short-term supply tightness rather than robust demand.
Spot volumes fell for a second consecutive week, from 3,508 bales to 2,471 bales, a 39.5% year-on-year decline. Cumulative volume for the season stands at 4,748 bales, below last year's 5,150. The main reason for thin trading is farmer reluctance to sell—as prices rise, growers expect even higher quotes later. But the deeper issue is that mills and traders find current levels unpalatable; many have already covered near-term needs and are slowing purchases.
Regional Weather Divergence
Weather conditions differ sharply between the Southeast and West Texas. Southeastern states like Georgia and Alabama received 1-3 inches of rain, improving soil moisture and boll set (77-84%), though open bolls remain low. In contrast, the High Plains of West Texas face severe drought, with some dryland fields likely abandoned due to late rains, forcing downward yield revisions. This 'east good, west bad' pattern suggests new crop quality and quantity may disappoint, underpinning forward prices.
Pest pressures are rising in pockets. Aphid infestations are worsening in the Blackland Prairies; cotton fleahoppers were found near the Brazos River, and insecticides were applied in Coastal Bend to control stink bugs. Southeastern pests are lighter, but growers remain vigilant. Rising pest control costs, coupled with uneven defoliant applications, will affect new crop timing and grade distribution. For buyers, this means premiums for high-grade cotton are likely to persist.
Demand-Side Transmission
Mill buying activity best reflects true demand. No US domestic mills reported inquiries or trades during the week; most have ample near-term coverage, with finished product demand weak-to-moderate and cautious sentiment. On the export front, agents from Thailand, South Korea, and Vietnam inquired for Green Card grade cotton (color 31, leaf 3, staple 37) in moderate volumes, with shipment in Sept-Oct, indicating solid demand for high-grade cotton in Asia, though price-sensitive.
Inquiries for discounted cotton from the Far East resulted in no trades, suggesting low-grade cotton lacks appeal and buyers await clearer price signals. This bifurcation—premium for high grades, neglect for low grades—will prompt Chinese importers to adjust strategies, prioritizing cost-effective high-grade lots rather than chasing cheap options.
Outlook
In the near term, US cotton spot prices are supported by supply tightness and weather premiums, with limited downside, but weak demand will cap gains, likely resulting in high-level consolidation. Medium-term, watch Texas drought impacts on new crop yields and whether supply pressures emerge as harvesting accelerates in September. For China's textile chain, chasing prices now is unwise; adopt a need-based, phased procurement approach while monitoring RMB exchange rate fluctuations affecting import costs.