Cotton benchmarks increased slightly over the past month. Most prices rose in the second half of August and then gave back some of those gains in the first two weeks of September.
- Prices for the December NY/ICE futures contract increased from 84 to 88 cents/lb over the past month. Values climbed as high as 93 cents/lb on August 31 before retreating in early September. Current levels are near 86 cents/lb.
- Prices for other 2026/27 NY/ICE contracts (March, May, and July) are higher than December. Values for May are currently the highest, near 91 cents/lb.
- More distant NY/ICE futures, for the 2027/28 crop year, are lower than 2026/27 prices. The December 2027 contract is near 80 cents/lb.
- The A Index briefly climbed above 100 cents/lb around the start of September. More recently, values retreated to 96 cents/lb, which is close to where the index was one month ago.
- The CC (China Cotton) Index 3128B rose from 121 to 124 cents/lb between the middle and end of August. In September, prices have been near 123 cents/lb. In terms of RMB/ton, values rose from 18,000 to 18,400 but later eased to 18,200 RMB/ton. The RMB strengthened from 6.75 to 6.71 RMB/USD.
- Indian prices rose from 91 to 94 cents/lb before easing back to 92 cents/lb. In terms of INR/candy, prices ranged between 68,400 and 70,200, with current values near 68,900 INR/candy. The INR held near 95 INR/USD.
- Pakistani cotton prices increased from 80 to 85 cents/lb or from 18,300 to 19,300 PKR/maund. The PKR held near 277 PKR/USD.
SUPPLY, DEMAND, & TRADE
The latest USDA report included a small decrease in the global production forecast for 2026/27 (-317,000 bales to 117.3 million) and essentially no change to the forecast for global mill-use (-1,000 bales to 122.9 million). Revisions for previous crop years lifted 2026/27 beginning stocks by 502,000 bales (to 75.3 million). The net effect of these updates on the projection for 2026/27 ending stocks was a 172,000 bale increase to 69.9 million. If realized, this would be the lowest level since 2011/12.
The largest changes to production figures included those for Brazil (+250,000 bales to 18.5 million), Kazakhstan (+125,000 to 0.5 million), Pakistan (-100,000 to 5.0 million), Turkey (-300,000 to 2.4 million), and the U.S. (-407,000 to 13.2 million).
The largest changes for mill-use were for Indonesia (+100,000 bales to 2.1 million) and the U.S. (-100,000 bales to 1.5 million).
The global trade forecast increased 436,000 bales to 44.2 million. For imports, the largest changes were for Indonesia (+100,000 bales to 2.1 million), Pakistan (+100,000 to 5.1 million), and Turkey (+200,000 to 5.0 million). For exports, the only significant change was for Brazil (+200,000 to 15.5 million).
PRICE OUTLOOK
The USDA’s mill-use estimates for 2025/26-2026/27 suggest back-to-back crop years with consumption over 120 million bales for the first time since 2006/07-2007/08. However, for 2026/27, it remains to be seen the extent to which demand might follow prices higher.
Combined with a smaller global harvest, current mill-use numbers indicate a production deficit of 5.6 million bales. This would be the largest shortfall since 2020/21. An implication is that ending stocks are expected to decline by a similar amount, and the USDA is predicting 2026/27 will have lowest level of global ending stocks since 2011/12. Tighter stocks can support higher prices, but it is early in 2026/27, and there is time for the outlook to evolve.
There are limited high-frequency indicators the market can track for timely information on demand. One potential source is the ongoing round of reserve sales in China. Since the current auction process began in late July, entire daily allotments have routinely sold out, despite the increases in auction prices that have occurred over the past few months. With China’s quota system and the separation it can create with prices in other markets, there can be factors other than spinning demand that can influence purchasing at reserve auctions. Nonetheless, the strength of sales at the auctions can be considered a reflection of appetite for cotton. In addition, if the Chinese reserve system eventually looks to the rest of the world to replenish the supplies sold at auction, that additional import demand could pull exporter stocks tighter and support prices.
Another indicator of demand is weekly U.S. export sales data. Early in a new crop year, sales tend to be slow as the U.S. harvest begins to be collected, classed, and prepared for shipment. However, over the past couple weeks, following the latest upward move in prices, sales have been particularly weak. In each of the last two weeks of available data, net new sales have been below 100,000 bales, and no individual country added more than 20,000 bales in either week. Total U.S. export commitment for delivery in the current crop year remains about 20% higher than it was one year ago, but mills appear to be taking a cautious approach to adding to obligations with prices near their current levels.
If there are sufficient downstream orders at sufficient prices, spinners can be expected to buy more fiber. In the current environment, it is not clear how robust downstream demand might be.
In previous periods when prices were able to maintain levels above 100 cents/lb (2010//11 and 2021/22), downstream demand was reacting to whipsawing macroeconomic conditions. The strong prices in 2010/11 occurred in the recovery after the financial crisis. During that time, the release of what was then-unprecedented stimulus swung the downstream situation from one of caution around order placement to one of concern about insufficient inventory. Similarly, in 2021/22, there was a swing from concern about a collapse in retail demand with the onset of the pandemic to a scramble to secure inventory after the release of record amount of global stimulus flipped the consumer outlook. In both of these instances, volatility in macroeconomic conditions created urgency downstream that bid up prices.
It remains to be seen how robust the downstream order environment is. There is some evidence of tightness in downstream inventory, primarily from the U.S., where there has been a widening divergence in consumer apparel spending and import volumes. It is less clear where downstream inventories stand elsewhere. Other key differences relative to other periods of higher prices may be that the world is not experiencing a sharp swing in macro conditions that can create urgency around downstream orders and that the current business environment does not feature massive stimulus. Instead of the near-zero interest rates that were present in 2010/11 and 2021/22, there is caution around inflation and discussion about increasing rates.
