Global cotton market volatility intensifies in May'26 as demand recovers, stocks tighten

• Cotton prices retreat after sharp May rally amid cautious mill buying
  
  
• Global consumption expected to exceed production in 2026-27
  
  

Global cotton markets witnessed heightened volatility in May 2026, as a sharp rally in futures and physical prices gave way to a broad correction amid cautious purchasing by spinning mills. The Cotlook A Index surged to a six-month high of 97.65 cents/lb on 12 May before retreating to close the month at 86.70 cents/lb, down 1,095 points from its peak and 235 points lower month on month. ICE July cotton futures followed a similar trajectory, settling at 76.15 cents/lb after trading within a wide 1,162-point range during the month.

The price correction triggered renewed buying interest across major importing countries. Earlier in the month, rapidly rising raw cotton costs significantly compressed spinning margins as yarn prices failed to keep pace, forcing many mills to delay purchases. However, once ICE futures fell below 80 cents/lb, mills in Bangladesh, Pakistan, Vietnam, and Turkiye returned to the market to secure near-term requirements. Bangladesh maintained active enquiries for Brazilian and West African cotton, while Pakistan booked cargoes from multiple origins, including the US and Brazil. Vietnam's mills focused on machine-picked cotton for prompt shipment, reflecting immediate consumption needs.

Despite improving spot demand, global trade remains heavily concentrated in Asia. According to USDA projections, Vietnam is expected to import a record 8 million bales in 2026-27, followed by Bangladesh at 7.8 million bales, reinforcing the region's position as the world's largest cotton consumption hub. Global cotton trade is forecast at 43.3 million bales, underlining resilient import demand despite macroeconomic uncertainty.

On the supply side, attention increasingly shifted to weather developments. US cotton planting reached 53% completion by late May, broadly in line with historical averages, although drought conditions persisted across key producing regions, particularly Texas. India announced a 7% increase in Minimum Support Prices (MSP) for the 2026-27 season and launched a $600 million Mission for Cotton Productivity aimed at improving yields through enhanced seed technology and agronomic practices. Meanwhile, China's Xinjiang region maintained its target-price subsidy at RMB 18,600/tonne through 2028, providing continued policy support to growers.

Fundamentally, the market outlook has become increasingly supportive. USDA forecasts global cotton production at 116.04 million bales in 2026-27, down sharply from 122.64 million bales in the previous season. In contrast, global consumption is projected to rise to 121.69 million bales, creating a production deficit of nearly 5.7 million bales. As a result, world ending stocks are expected to decline from 77.27 million bales to 71.84 million bales, marking one of the largest annual inventory drawdowns in recent years. Cotton Outlook's estimates point to a similar trend, projecting global consumption at 26.11 million tonnes against production of 25.45 million tonnes, resulting in a stock reduction of approximately 657,000 tonnes by the end of the marketing year.

Outlook

The cotton market enters the second half of 2026 with improving demand fundamentals and a tightening global balance sheet. While downstream textile demand remains uneven and highly price-sensitive, declining inventories, resilient import demand from Asia and weather-related production risks across the US, India,and China are likely to provide underlying support to prices. Market participants will closely monitor monsoon progress in India, moisture conditions in Texas and crop development in Xinjiang, as any supply disruption could further tighten an already shrinking global stock position.