U.S. cotton futures are undergoing a weather-driven price reassessment. On May 13, the most active ICE July contract settled at 86.81 cents per pound, up 0.57% on the day and touching the highest level since April 2024. The core driver is persistent drought across key producing regions, especially Texas. For the textile industry, this means rising uncertainty in raw material costs and a narrowing window for downstream procurement decisions.
Drought and Planting Progress Challenge Supply Expectations
The latest USDA crop progress report showed U.S. cotton planting at 29% as of May 12, ahead of the prior week's 21% and the five-year average of 28%, but the market focused instead on deteriorating soil moisture in the South, particularly Texas. A Price Futures Group analyst noted that while the Delta and Southeast have seen slight improvement, Texas remains critically dry. The USDA's May supply-demand report estimated 2025/26 U.S. cotton production at 13.9 million bales, a figure predicated on normal weather. If drought persists through the growing season, actual output will likely fall short. Globally, the USDA projects 2025/26 output at 122.64 million bales with ending stocks of 77.27 million bales, but this relatively comfortable outlook is being eroded by weather risks.
Oil Prices and Substitution Dynamics Provide Indirect Support
Another often-overlooked variable is energy prices. Crude oil has held above $100 per barrel during the same period, significantly raising production costs for polyester—cotton's main substitute. Higher polyester prices can shift textile mills' purchasing preferences toward cotton, creating additional demand-side support. The ICE cotton market itself shows signs of tight inventories: deliverable stocks for No. 2 cotton contracts stood at 185,378 bales as of May 12, only marginally higher than the previous day and at a relatively low level overall. This combination of low inventories and high oil prices gives speculative longs a reason to stay engaged.
Brazil's Lowered Production Estimate Adds Global Supply Uncertainty
Supply news from South America also tightened. Consultancy Safras & Mercado cut its 2025/26 Brazil cotton production estimate from 3.76 million tons to 3.74 million tons. As the world's second-largest cotton exporter, any revision in Brazil's output directly affects international tradable volumes. Combined with U.S. drought risks, the global cotton supply picture is shifting from "moderately ample" to "tightening balance." For Chinese textile mills reliant on imported cotton, this means reassessing overseas procurement costs and timing.
Near-Term Outlook and Industrial Transmission Path
Given current bullish and bearish factors, ICE cotton is likely to remain firm in the near term. The weather premium is not yet fully priced in, and the USDA's production estimates may be revised downward if drought worsens. On the demand side, market hopes for improved U.S.-China trade relations provide additional psychological support. However, a strengthening U.S. dollar could act as a headwind for dollar-denominated cotton. For downstream textile mills, rising cotton prices will directly feed into yarn costs, especially for high-count varieties. The profit distribution along the cotton-textile chain is shifting upstream, increasing pricing pressure on gray fabric and finished fabric segments.