On August 31, ICE cotton futures for December settled at 93.14 cents/lb, up 1.93% on the day, and touched 93.74 cents/lb intraday, the highest since early 2024. Over the entire month of August, the contract gained about 14%, marking the second consecutive monthly advance. Behind this rally are three converging factors: weather, geopolitics, and energy prices.
Background
Persistent hot and dry conditions in key US cotton-growing regions are the most direct driver. Market expectations of lower production have strengthened, with traders closely watching the USDA supply-demand report due September 11. A Kansas-based commodity analyst noted that the price rise stems from multiple uncertainties: output levels, El Niño impacts, and oil price trajectories.
Meanwhile, international oil prices rose more than 2% on August 31, following a US strike on an Iranian island and Tehran's response, escalating the Middle East conflict. Higher oil directly raises production costs for polyester fiber, a major substitute for cotton, thereby enhancing cotton's competitiveness and providing indirect support to cotton prices.
Industry Impact
For the textile supply chain, elevated cotton prices mean significantly higher raw material costs. Spinning and fabric mills relying on cotton will face increased procurement costs, squeezing profit margins. At the same time, rising polyester costs weaken the substitution advantage of man-made fibers, potentially shifting some orders back to cotton products—provided downstream buyers accept higher prices.
Looking at regional industrial clusters, cotton-producing and processing areas such as Xinjiang, Shandong, and Henan gain stronger pricing power, while downstream weaving and apparel enterprises face greater cost-control pressure. In international trade, a weaker dollar somewhat eases procurement costs for non-US buyers, but geopolitical tensions may raise freight and insurance costs, adding uncertainty to export order fulfillment.
In the short term, supply concerns dominate market sentiment, and prices are prone to further gains. However, if the USDA report shows better-than-expected data, or if Middle East tensions ease, prices could correct. For buyers and exporters, the current strategy should focus on risk hedging and order pacing.