The global cotton market is entering a critical variable period. The latest USDA Crop Progress report shows that as of July 5, the US cotton good-to-excellent rate stood at only 46%, down 2 percentage points from the previous week and a full 6 points lower than the same period last year. This data comes during the most important squaring and boll-setting stages, and its signal cannot be ignored.
Growth Indicators Decline Across the Board
Looking at sub-indicators, US cotton growth is under broad pressure. The squaring rate reached 49%, flat with last year but slightly above the five-year average of 47%, indicating no significant acceleration in development. More notably, the boll-setting rate is only 14%, below last year's 13% and equal to the five-year average. This suggests that during the key window for yield formation, potential per-unit output is being constrained.
The decline in the good-to-excellent rate is not an isolated event. Over the past few weeks, the rate has fallen for two consecutive weeks from 48% to 46%, below market expectations. Industry generally believes that when the rate falls below 50%, the risk of yield loss in the later stages increases significantly. For new crop US production estimates, this data may trigger downward revisions by analytical agencies.
Impact on Global Supply and Prices
The US is one of the world's largest cotton exporters, and its production fluctuations directly affect international cotton prices. The current low good-to-excellent rate, combined with persistent high temperatures and drought in key regions like Texas, is fueling market concerns about 2025/26 US production. If weather does not improve significantly later, total US output may fall below the USDA's previous estimate of about 3.2 million tons.
For China's textile industry, this change means rising import cotton costs. China imports large volumes of US cotton annually for medium-to-high-end yarn and fabric production. If US cotton prices rise due to production cut expectations, it will directly increase raw material costs for domestic textile enterprises, especially large spinning mills reliant on imports. Meanwhile, domestic cotton prices may also strengthen under external market influence, further squeezing profit margins in downstream weaving and garment sectors.
Procurement Strategy Needs Early Adjustment
This period is a critical observation window before new crop arrival. For textile enterprises, raw material procurement needs to be more flexible. On one hand, if the good-to-excellent rate continues to deteriorate, companies should increase inventories moderately to lock in current relatively low prices. On the other hand, they must closely monitor weather forecasts for major US production areas to avoid chasing prices due to short-term weather speculation.
For Buyers - Recommend phased building of positions to avoid price volatility risk from concentrated purchases after data releases. - Monitor the spread between US cotton futures and Zhengzhou cotton; if the spread widens, consider point pricing to lock in costs. - Strengthen communication with traders to obtain first-hand production area weather and growth reports, anticipating supply schedules.
For Textile Mills - Assess cotton requirements and delivery timelines for existing orders; for longer-cycle orders, consider increasing the proportion of alternative varieties such as Brazilian or Australian cotton. - Optimize product mix; in anticipation of higher cotton prices, appropriately increase the share of blended or chemical fiber products to hedge raw material cost pressures. - Establish a linkage mechanism between raw material costs and finished product pricing, incorporating price adjustment clauses when accepting orders.
Overall, the persistent decline in US cotton good-to-excellent rates is injecting new uncertainty into the global cotton market. For China's textile industry chain, this presents both risks and opportunities—companies that adjust procurement strategies early and optimize raw material structures will gain an advantage in the next round of price volatility.