International cotton prices staged a notable rally in mid-August, with the ICE December contract jumping 1.56% to settle at 84.80 cents per pound, marking a fourth consecutive weekly gain. The move was driven by strong US export sales and drought concerns, but the deeper logic is that the global cotton balance sheet is shifting from a loose to a tighter stance, making the market less sensitive to bearish news.
Event Background
The immediate catalyst was the USDA export sales report released on Thursday. For the week ending August 6, net sales of US upland cotton for the 2026/27 season reached 904,989 bales, far exceeding market expectations and well above recent weekly averages. Notably, old-crop sales for 2025/26 were negligible at just 1,265 bales, while the concentration of new-crop sales indicates that overseas buyers are locking in US cotton supply ahead of time.
Another key detail is the pace of shipments. Shipments totaled 67,923 bales through July 31, but in just six days from August 1 to 6, shipments reached 140,451 bales, indicating accelerated logistics. This suggests that global mills' actual demand for US cotton remains resilient despite earlier price volatility. For buyers, this means basis levels may continue to firm, narrowing the window for price-on-fixation purchases.
Industry Impact
Weather conditions provided a second pillar of support. The southern US growing regions are experiencing extreme heat and scarce rainfall, causing significant crop stress. Jack Scoville, vice president of Price Futures Group, noted that the weather is quite extreme and crops are under pressure. Although the USDA has not yet cut production estimates, the market is already pricing in potential yield losses. If drought persists, new-crop production could fall short of forecasts, further tightening global ending stocks.
A more macro variable is El Niño. This year's El Niño is expected to be relatively strong, which could significantly alter global rainfall patterns, affecting not only US cotton but also major southern hemisphere producers like Brazil and Australia. For Southeast Asian textile mills that rely on imported cotton, this means procurement strategies need to become more flexible: hedging against price upside while also watching currency fluctuations.
From a broader market perspective, CBOT wheat futures rose over 3%, reflecting widespread concerns about tight global agricultural supplies, while a weaker US dollar reduced the holding cost of dollar-denominated commodities. These factors are creating a supportive environment for cotton prices. However, one should remain cautious: ICE registered stocks stood at around 75,985 bales, down slightly from the previous day but still at a meaningful level. If prices rally sharply, delivery pressure could limit gains.