The 90-cent-per-pound level was reclaimed by ICE cotton futures on August 27, with the December contract settling at 92.41 cents and touching an intraday high of 92.75 cents, the strongest since April 2024. For the textile supply chain, this is not just a price jump but a collective repricing of supply-demand expectations—US cotton quality ratings dropped to 37%, 17 percentage points lower than a year ago, while export sales halved in a single week. The coexistence of rising prices and weakening demand is forcing upstream and downstream players to reassess inventory and pricing logic.
Event Background
The deterioration in US cotton fundamentals is not sudden. The latest USDA crop progress report shows that as of late August, the good-to-excellent rating was only 37%, compared with 54% a year ago. Field surveys indicated significant crop deterioration, and weather concerns, amplified by expectations of a strong El Niño, are fueling worries about supply from major producing countries. Month-to-date, ICE cotton futures have gained over 13%, with clear fund-driven momentum.
Meanwhile, export data tells a different story: for the week ending August 20, US cotton export sales were 95,726 bales, down 54% week-on-week, with net sales to China of only 1,628 bales and zero for the next marketing year. This suggests that the price rally is driven more by supply contraction expectations than by actual orders. A slightly weaker dollar and firmer oil prices also reinforced the bullish sentiment in commodities.
Industry Impact
A cotton price above 90 cents directly raises raw material costs for textile mills. More importantly, the question is whether such gains can be passed downstream. Global textile end-demand remains weak, and the pricing power of yarn and fabric segments is limited. If cotton stays high, mill margins will be squeezed further, and some small and medium enterprises may be forced to cut production or postpone purchases.
What does a 90-cent cotton price mean for buyers? First, the window to lock in forward raw material costs is narrowing, but the risk of chasing highs is accumulating. Second, the price spread between US cotton and Brazilian or Australian cotton may widen, prompting some buyers to shift to more cost-effective origins. Additionally, if El Niño actually affects Southern Hemisphere planting in Q4, the international cotton price center may move higher, and RMB exchange rate fluctuations will also become a variable.
From a chain transmission perspective, a cotton rally usually lifts substitute fibers like polyester staple and viscose staple with a lag, but current overcapacity in chemical fibers may weaken the substitution effect compared with previous years. For foreign trade companies, cotton price volatility affects quotation stability, making long-term contract locking more difficult. Price adjustment clauses should be included in contracts to hedge risks.