HG MARKETS: 

August 2026 Cotton futures have staged a strong recovery in the international market, with prices climbing toward 92 cents per pound, marking their highest levels in roughly two years. After spending much of the previous period in bearish territory, cotton has regained bullish momentum as adverse weather conditions, lower production expectations, and rising global consumption raise concerns about tightening supplies.

Weather has emerged as one of the key drivers behind the recent rally. In the United States, particularly in major cotton-producing regions such as Texas, extreme heat and untimely rainfall have affected crop conditions. According to recent USDA estimates, only around 37% of the US cotton crop is rated good to excellent, while projected US production has been reduced to approximately 13.61 million bales.

Conditions in other major producing countries are also adding to supply concerns. In India, weaker monsoon conditions could negatively affect cotton production, while quality-related challenges in China may increase the country’s dependence on imports.

At the same time, global cotton demand is strengthening. The USDA’s August outlook increased projected global cotton consumption by nearly 1 million bales, bringing total consumption to around 122.9 million bales

Demand from major textile markets, including India, China, and Vietnam, remains an important source of support. Some market analysts expect the 2026/27 season could face a global deficit of around 2.8 million bales, potentially putting further pressure on inventories and supporting higher prices.

The strength in crude oil prices is another factor influencing the cotton market. Higher oil prices increase the cost of producing synthetic fibers such as polyester. As polyester becomes more expensive, textile manufacturers may have greater incentive to use natural fibers such as cotton.

This shift could provide additional support to cotton demand and prices, particularly if crude oil prices remain elevated.

Technical indicators are also pointing toward a stronger market environment. Cotton futures are currently showing bullish momentum, while increased long positioning by managed money and other market participants suggests growing investor confidence.

The combination of improving technical sentiment and fundamental supply concerns has helped reinforce the recent upward move.

In the near term, cotton prices could remain supported within the 90–95 cents per pound range. A sustained move above this zone could open the door toward the psychologically important 100-cent level.

However, the market remains sensitive to weather developments; US crop conditions, the strength of the US dollar, and actual demand from textile mills. If weather conditions deteriorate further or the dollar weakens, cotton could receive additional upward momentum.

The key question for the market will be whether textile mills continue purchasing cotton at elevated prices or step back and wait for a potential correction.

Overall, the cotton market has shifted toward a more bullish outlook, with supply risks, stronger global consumption, and supportive market positioning providing the main catalysts for further gains.