On August 28, ICE cotton futures for December delivery fell 1.03 cents, or 1.11%, to settle at 91.38 cents per pound, as investors took profits ahead of the weekend. Despite the daily decline, the contract posted a sixth consecutive weekly gain, rising about 3.4% for the week—the largest weekly advance since early July. The pullback does not alter the medium-term uptrend, as weather factors continue to reshape global supply expectations.
Market Context
The rally began in mid-July amid growing concerns over weather conditions in major producing regions. By August 28, the contract had gained over 12% for the month, hitting an intraday high of 92.75 cents on Thursday, the highest level since early 2024. The sharp rise prompted profit-taking, but fundamental support remains intact.
On the supply side, Texas continues to face drought, and India's monsoon has been unusually weak. Indian meteorological officials report that the country is experiencing its weakest monsoon in nearly two decades, with rainfall expected to be about 15% below the long-term average. According to a USDA FAS report from New Delhi, India's cotton production for 2026/27 is estimated at 24.5 million bales, with planted area around 11.5 million hectares. However, yields are expected to decline 2% to 464 kg per hectare due to below-normal rainfall in August and September, with the western and central regions facing the highest drought risk.
Additionally, this year's El Niño is expected to be particularly strong, significantly altering rainfall patterns and adding to supply uncertainty. ICE data showed certified stocks of deliverable No. 2 cotton at 66,327 bales as of August 27, unchanged from the previous session, with low inventories providing some support.
Industry Impact
The high cotton price is transmitting through the supply chain. For textile mills, raw material cost pressure is mounting, squeezing margins for yarn producers. Buyers need to reassess inventory strategies: if weather risks persist, prices may stay elevated or rise further; but if profit-taking triggers a deeper correction, a window for restocking may emerge.
Globally, India's downward production revision directly impacts the supply-demand balance. A 2% yield decline implies a larger actual output cut than previously estimated, supporting prices in the medium term. Meanwhile, persistent drought in Texas could also lower US production, tightening global supply further.
For exporters, price volatility complicates quoting. Cost pass-through lags, so orders require careful consideration of currency and raw material fluctuations. Downstream clients may resist high cotton prices, shifting to synthetic fibers, which could dampen cotton demand.