US Cotton Exports and Weather Risks Drive Fourth Weekly Gain on ICE

On August 14, ICE cotton futures for December settled at 84.80 cents per pound, up 1.30 cents or 1.56%, marking a fourth consecutive weekly gain. This move was not isolated—the previous day's USDA export sales report showed net sales of 904,989 bales for the 2026/27 season, far exceeding expectations, while persistent heat and drought in the southern US growing regions provided additional support on the supply side.

Market Context

The export data was the immediate catalyst. The USDA report, covering the week ending August 6, showed net sales of 904,989 bales for the new crop year, compared to just 1,265 bales for the old crop year and 19,369 bales for 2027/28. The sharp contrast between old and new crop sales indicates that buyers are already locking in new-crop supplies. Shipments also accelerated: 67,923 bales were shipped in the week ending July 31, while 140,451 bales were shipped between August 1-6, nearly doubling week-over-week, signaling accelerating physical demand.

Weather concerns amplified supply worries. Southern US cotton regions are experiencing extreme heat and scarce rainfall, stressing crops. A vice president at Price Futures Group noted that the market's delayed reaction to the USDA report, combined with weather threats, pushed prices higher. Importantly, this year's El Niño is expected to be strong, potentially altering global rainfall patterns, which adds significant uncertainty for water-sensitive cotton crops.

Industry Impact

For domestic textile mills in China, rising US cotton prices directly increase import costs. The Cotlook A index stood at 94.05 cents per pound, nearly 10 cents above futures, reflecting tight physical supply. If drought persists in US growing regions, production shortfall expectations will strengthen, keeping international prices elevated and pressuring mills that rely heavily on imports.

Along the supply chain, higher cotton prices will gradually pass through to yarn and fabric costs. However, domestic downstream demand remains weak, limiting the ability to raise fabric prices, which may squeeze mill margins. Buyers should be wary of the "strong outside, weak inside" pattern and plan import purchases carefully to avoid chasing highs.

Macro factors are also influencing cotton. The US dollar index fell following weak retail sales data, making dollar-denominated cotton cheaper for buyers holding other currencies, providing additional price support. Meanwhile, rising crude oil prices increase shipping costs, further adding to landed costs of imported cotton.

Practical Recommendations

For Buyers - Monitor weather conditions in US cotton regions; if drought persists, consider locking in forward contracts to hedge against rising costs. - Compare the spread between ICE futures and the Cotlook A index; when physical premiums are high, prefer point pricing or basis purchases. - Watch the dollar trend; if the dollar weakens, increase import purchases to reduce currency costs.

For Exporters - Include cotton price fluctuation clauses in export quotations to protect margins from raw material cost increases. - Track El Niño's impact on global cotton production, adjust product mix and sourcing to diversify supply risks. - Use futures markets for hedging raw material costs, especially avoid chasing highs when prices are elevated.