GTHT has released a research report stating that ICE Cotton No. 2 futures settled at 68.71 cents per pound on March 17, representing a 6.2% increase from the beginning of last week and a 7.0% rise compared to the Q4 2025 average price, indicating a continued strengthening trend for U.S. cotton prices. On the demand side, catalysts include the issuance of additional cotton import quotas by China's National Development and Reform Commission and ongoing China-U.S. talks. On the supply side, Brazil's production reduction has materialized, and drought indices in major U.S. cotton-growing regions are currently at historically high levels. Both the U.S. and China will enter their planting seasons in April, making weather conditions a key short-term variable for the market; subsequent U.S. and Chinese planting progress should be closely monitored. The report continues to highly recommend yarn industry leaders that benefit from rising U.S. cotton prices, namely BROS Eastern Co., Ltd. (601339.SH) and Texhong International Group (02678).
The main viewpoints of GTHT are as follows:
U.S. cotton prices continue to strengthen, with demand-side catalysts becoming apparent. ICE Cotton No. 2 futures settled at 68.71 cents per pound on March 17, up 6.2% from the start of last week and 7.0% higher than the Q4 2025 average price. This is judged to be primarily due to: the NDRC's announcement on March 16 of an additional 300,000 tonnes of cotton import quotas for processing trade; and market reports indicating that during the first day of China-U.S. bilateral trade talks in Paris, Chinese negotiators expressed willingness to increase purchases of U.S. agricultural products, including poultry, beef, and non-soybean crops (which is judged to likely include cotton). The scale of this additional import quota issuance is 100,000 tonnes larger compared to 2024 and 2025, and its timing is significantly earlier than the usual July-August period. This is judged to be mainly due to the persistently widening price gap between domestic and international cotton since the beginning of the year. The price spread between U.S. cotton and Xinjiang cotton has continued to widen to 6,397 yuan/tonne, while the spread between the Cotlook A Index and Xinjiang cotton has expanded to 5,265 yuan/tonne. Both spreads are at approximately the 97.7th and 99.1st percentiles, respectively, compared to the past decade. As the cotton import quotas for processing trade are not subject to the additional 10% tariff on U.S. cotton, U.S. cotton, being the lowest-priced variety among core cotton-producing nations, demonstrates significant export value (current spot offers for Indian S-6 new cotton are around 76 cents/lb, while the Brazil CEPEA/ESALQ cotton spot price index is 70.09 cents/lb).
The U.S. reached trade reciprocity agreements with Bangladesh and India in February. In February 2026, the U.S. and Bangladesh established a special mechanism under their agreement whereby exports to the U.S. using inputs like U.S. cotton enjoy zero tariffs, with quotas linked to U.S. raw material exports to Bangladesh. In the agreement reached with India, India committed to purchasing $500 billion worth of U.S. products over five years, which will include equivalent textile preferences. Combined, these two countries accounted for approximately 9% of U.S. cotton export value in 2024. These agreements are expected to incentivize preferential use of U.S. cotton in these countries, directly benefiting U.S. cotton export demand. It is noteworthy that China is the largest buyer of U.S. cotton, accounting for nearly 30% of U.S. cotton export value in 2024. If further purchasing signals are released in subsequent talks, this could resonate with demand from South Asia, injecting stronger momentum into U.S. cotton exports.
On the supply side, Brazil's production reduction has materialized. Brazil, as a major Southern Hemisphere producer, has concluded planting for the new season. CONAB forecasts a 6.9% year-on-year decline in production for the 2025/26 season. In Mato Grosso state (accounting for 70% of Brazil's production), lint production for 2025/26 is projected to decrease by 15.16% year-on-year, with planted area down 8.06% year-on-year. Subsequent planting progress in the U.S. and China should be closely monitored, as both countries enter their planting seasons in April, making weather a key short-term market variable. Currently, drought conditions in major U.S. cotton-producing regions are severe. Drought indices in states like Texas, Georgia, Arkansas, and Alabama are all at historically high levels for this time of year, with Georgia, Arkansas, and Alabama experiencing their most severe conditions in nearly a decade. Nearly half of Texas is in extreme drought, while California is largely drought-free.
Risk warnings include end-consumer demand falling short of expectations, fluctuations in raw material prices, and intensifying industry competition.