The US cotton belt is facing a drought test that cannot be ignored. On May 13, ICE July cotton futures settled at 86.81 cents/lb, up 0.57% from the previous session, hitting the highest level since April 2024. The core driver behind this rally is the persistent dry weather in the southern United States, especially in Texas. For the textile industry, this means new cost pressures are building on the raw material side.
Drought Hits Core Production Area, Planting Progress Fast but Concerns Remain
The latest USDA crop progress report shows that as of mid-May, US cotton planting had reached 29%, above the prior week's 21% and slightly above the five-year average of 28%. On the surface, planting progress is not slow, but the key lies in soil moisture. Texas, the largest cotton-producing state in the US, has drawn market attention due to its severe drought. Jack Scoville, vice president of Price Futures Group, noted that although conditions have slightly improved in the Delta and Southeast regions, Texas has been "very dry," which is critical for cotton growth. This suggests that even if planted acreage does not decrease, yield prospects could be affected, thereby suppressing actual production for the 2026/27 season.
USDA Supply-Demand Data Points to Inventory Contraction, Divergent Global Production Expectations
In its May WASDE report, the USDA provided its first full estimates for the next two seasons. Global cotton production for 2025/26 is projected at 122.64 million bales, with ending stocks of 77.27 million bales. For 2026/27, production is expected to fall to 116.04 million bales, with ending stocks shrinking to 71.84 million bales. For the US itself, the 2025/26 production estimate is 13.9 million bales, and the 2026/27 estimate is 13.3 million bales. The expectation of declining output year by year echoes the current drought. Meanwhile, data from Brazil is also being adjusted. Safras & Mercado lowered its 2025/26 Brazilian cotton production estimate from 3.76 million tons to 3.74 million tons. Although the adjustment is modest, it signals that South American production growth may be slowing.
High Oil Prices and Demand Expectations Provide Dual Support
The cotton market does not operate in isolation. International oil prices remain above $100 per barrel, which directly raises production costs for polyester fibers and other cotton substitutes, indirectly enhancing cotton's relative competitiveness. On the demand side, market sentiment is improving. Scoville said traders are "hoping for the best" that the US can export various agricultural products to major buyers, including cotton. This optimism partially offsets macroeconomic pressures from strong inflation data and the possibility that the Federal Reserve may maintain restrictive policies. Additionally, the S&P 500 and Nasdaq both closed at record highs, led by tech stocks, boosting risk appetite in commodity markets.
Industry Impact: Under a Firm Cotton Price Pattern, Procurement and Inventory Management Need to Be More Proactive
In the short term, if the drought in major US cotton-producing areas does not significantly ease, ICE cotton futures are likely to trade in a firm range of 85-90 cents/lb. For textile companies, rising raw material costs will directly squeeze profit margins, especially for conventional medium- and low-count yarns. At the same time, the expectation that global ending stocks will decline for two consecutive years means the supply side is gaining more pricing power.