US cotton spot market is experiencing a rare divergence between price and volume. In the week ending August 27, the average spot price for base quality cotton across seven designated markets rose 293 points from the previous week to 82.88 cents per pound, nearly 20 cents higher than a year ago. Yet spot trading volume plunged to just 934 bales, down about 77% from 4,051 bales in the same period last year. This contrast signals structural shifts on both supply and demand sides.
Background
The price surge is not isolated. ICE October cotton futures settled at 91.06 cents per pound, up more than 4 cents week-over-week. The synchronized strength in futures and spot reflects growing concerns about future supply. However, spot trading volume has declined for two consecutive weeks, with cumulative volume this season reaching only 6,648 bales, less than half of last year's figure. Behind the thin trading is a tug-of-war between sellers holding back and buyers waiting on the sidelines.
On the supply side, Texas is experiencing extreme heat and drought, with over 50 days of triple-digit Fahrenheit temperatures. Dryland cotton fields continue to deteriorate, and abandonment rates are rising. Some fields near the Caprock escarpment are faring better, but irrigation water levels are low, and more fields are nearing physiological maturity. This means actual new-crop supply may fall short of earlier expectations, providing price support.
Industry Impact
For textile mills, raw material cost pressures are evident. Domestic mills have only moderate inquiries for high-grade cotton, with fourth-quarter delivery required. Most mills have already covered near-term needs, and finished product orders are lackluster. Buyers remain cautious, reluctant to restock at elevated prices. This caution extends to export channels—inquiries from Thailand and Central America have not translated into confirmed sales, indicating limited acceptance of current price levels.
For traders and growers, higher prices should be positive, but shrinking volumes mean difficulty in monetizing inventory. Some Texas gins are not expected to start operations until mid-to-late September, while Rio Grande Valley gins are already running but with seed cotton modules piling up. Processing progress may be constrained by weak demand. If prices continue to rise with persistently low volumes, the market could face a stalemate of priced but unsold cotton.
From a broader perspective, the divergence between US cotton prices and trading volumes reflects a mismatch between the global textile industry's inventory cycle and weather-related supply risks. Downstream demand recovery is sluggish, while upstream supply is contracting due to climate uncertainty. This scissors effect may widen in the coming months. For buyers reliant on US cotton, balancing cost control and supply chain security will become more challenging.