87.77 cents per pound. That was the settlement price for the ICE cotton July futures contract on May 11, marking a single-day gain of 3.04 cents, or 3.59%, and hitting its highest level since April 2024. For the textile supply chain, this figure signals that upstream raw material costs are entering a new pressure zone.
Demand Expectations and Geopolitical Factors in Concert
The rally in cotton futures was driven by more than one factor. The core catalyst was an improved outlook for U.S. cotton export demand. Recent trade policy signals from President Donald Trump have led the market to reassess the export potential of U.S. agricultural products, especially cotton to China and global markets. Rogers Varner, president of Varner Brokerage, directly pointed to this in his commentary.
At the same time, international oil prices rose nearly 3% on the day, as tensions in the Strait of Hormuz continued to simmer and the U.S.-Iran ceasefire agreement appeared "fragile." Higher oil prices directly increased the production cost of polyester fiber—the main synthetic substitute for cotton in textile raw materials. When polyester becomes more expensive, downstream buyers tend to shift more demand toward natural fibers, providing additional support for cotton prices.
Speculative money flows also sent a clear signal. CFTC data showed that for the week ending May 5, speculative net long positions in ICE cotton futures and options increased by 12,977 contracts to 79,676. The continued influx of speculative capital indicates that bullish sentiment is building in the market.
Fundamentals: Planting Progress and Inventory Structure
On the supply side, the USDA's weekly crop progress report showed that as of May 10, U.S. cotton planting was 29% complete, up from 21% the previous week and above both last year's 27% and the five-year average of 28%. The slightly faster planting pace did not weigh on futures prices, as the market's current focus is on demand rather than supply.
In terms of inventories, deliverable stocks of No. 2 cotton futures on ICE stood at 182,221 bales as of May 8, up only 89 bales from the previous day. Inventory levels remain relatively stable, with no significant delivery pressure, providing a more accommodative environment for bullish capital.
The physical market also strengthened. On May 11, the Cotlook A Index rose 185 points to 94.65 cents per pound. The spread between physical and futures prices remained at 6.88 cents per pound, reflecting continued market acceptance of higher cotton prices.
Implications for the Textile Supply Chain
For Chinese textile companies, ICE cotton breaking above 87 cents means a significant increase in imported cotton procurement costs. The domestic-international cotton price spread may further narrow or even invert, directly squeezing the profit margins of export-oriented mills that rely primarily on imported cotton.
Meanwhile, the pass-through effect of higher oil prices on the polyester chain cannot be ignored. If tensions in the Strait of Hormuz persist and crude prices remain elevated, the cost of polyester staple fiber and filament will also rise, altering downstream fabric mills' and garment makers' decisions on the cotton-polyester blend ratio.
Market participants are closely watching the USDA's upcoming World Agricultural Supply and Demand Estimates (WASDE) report. The global production, consumption, and ending stock data in that report will provide key guidance for the next phase of cotton price movements.