Persistent drought in Texas has become the most critical driver behind the recent rally in international cotton prices. On May 13, the ICE July cotton futures contract settled at 86.81 cents per pound, up 0.49 cents on the day and touching its highest level since April 2024. This rally is not an isolated event—it reflects the convergence of weather conditions, global supply-demand data, and crude oil prices. For the textile industry, it signals a new round of cost pressure on raw materials.
Drought and Supply-Demand: Two Key Variables
The USDA's latest May WASDE report provides clear numerical anchors. Global cotton production for 2025/26 is projected at 122.64 million bales, with ending stocks of 77.27 million bales. For 2026/27, output is expected to fall to 116.04 million bales, with stocks tightening to 71.84 million bales. The consecutive downward revisions reflect both acreage contraction and yield uncertainty.
U.S. data is more direct: 2025/26 production is estimated at 13.90 million bales, and 2026/27 at 13.30 million bales. As of May 12, ICE deliverable cotton stocks stood at 185,378 bales, up slightly from the previous day but still near historical lows. The USDA weekly crop progress report shows 29% of U.S. cotton has been planted, above the prior week's 21% and slightly above the five-year average of 28%. However, faster planting cannot mask deteriorating soil moisture in key regions. A Price Futures Group vice president noted that Texas remains very dry, while conditions in the Delta and Southeast have improved modestly but are insufficient to offset the broader dry pattern.
In Brazil, consultant Safras & Mercado trimmed its 2025/26 production estimate from 3.76 million tons to 3.74 million tons, reinforcing expectations of tighter South American supply.
Oil Prices and Substitution: The Cost Logic Behind Cotton
Crude oil prices staying above $100 per barrel provide indirect but significant support to cotton. Higher oil prices raise production costs for polyester fiber—cotton's main substitute—weakening its competitive advantage. This price ratio often becomes a key variable when textile mills make raw material allocation decisions. The current spread between cotton and polyester staple fiber has narrowed, theoretically favoring a marginal recovery in cotton consumption.
However, a strengthening U.S. dollar index poses some headwinds for dollar-denominated cotton. Meanwhile, gains in U.S. tech stocks reflect liquidity expectations rather than real demand, so downstream buying intentions in the cotton-textile chain still need to be monitored.
Impact on Industrial Clusters and Procurement Windows
For China's textile industrial clusters, higher ICE cotton futures directly raise the landed cost of imported cotton. Export-oriented fabric hubs like Keqiao and Shengze, as well as home textile exporters in Nantong, will face a tug-of-war between rising raw material costs and final order price negotiations. Currently, Zhengzhou cotton futures have risen less than the international market, widening the inversion of domestic-import price spreads. This may curb some import buying interest and shift demand toward Xinjiang cotton.
On the supply side, if the U.S. drought persists into the boll-setting period, it could materially threaten final yields. The 2026/27 production estimate has already been lowered to 13.30 million bales; further weather deterioration could push global ending stocks below 70 million bales, triggering a stronger price reaction.