Cotton has re-emerged as a key factor for the apparel industry. After more than a year of particularly stable prices, a combination of geopolitical disruption, shifting supply fundamentals and evolving trade policy have created complexity for sourcing executives making fiber decisions.
While prices have retreated from their recent highs, the market has entered a new phase where weather, inflation, consumer demand and potential U.S. tariff changes could all influence where cotton goes next. Jon Devine, chief economist for Cotton Incorporated, shares what’s driving the market today, what to expect through the balance of 2026 and the indicators sourcing teams should be watching most closely.
HGI: What does the industry need to know about cotton prices today?
JD: There has been a lot of moving going on in recent months and weeks. In contrast to the period of low and stable prices that started in early 2025 and lasted through early 2026, there has been both strong upward and downward movement in the market recently.
Increases followed the outbreak of the conflict around Iran (Feb 28). Decreases that wiped out some of those gains began around the middle of May. From the levels around 65 cents/lb that were common in 2025 and into 2026, values climbed as high as 88 cents/lb. Current prices have been trading between 75 and 80 cents/lb.
Speculative influences contributed to market volatility, but recent swings in cotton prices also reflect an evolution in supply-and-demand dynamics.
With lower prices in recent years, growers around the world have been facing significant profitability pressure. This was due not only to lower prices, but to higher costs. Input costs were up 30% before the conflict around Iran started. The Persian Gulf is a major exporter of fertilizer, and the constraints on those supplies pushed those costs higher. Due to lower expected returns, cotton producers in many major growing countries lowered acreage for the upcoming 2026/27 crop year.
At the same time, preliminary forecasts suggest some strength in world mill-use. These expectations have been based on the availability of cotton, some improvement in cotton’s price competitiveness relative to polyester, and tightness in apparel inventories in countries like the U.S.
The combination of a smaller cotton crop and rising mill demand has been projected to result in a production deficit. This has been a factor supporting cotton prices at levels higher than they were a year ago.
Given all the movement in geopolitical events and over the past few months, however, uncertainty remains. The weather is always a known unknown this time of year. On the demand side, there are questions about how stronger inflation could affect consumer, retailer, and mill purchasing.
HGI: What’s the outlook for the balance of the year?
JD: Projections for a production deficit can be expected to support prices at levels higher than they were in 2025 and early 2026. Nonetheless, there may be limits on how much prices could move beyond current values
Over the past few crop years, warehoused stocks were built up in several countries, and these supplies can be leveraged against potential tightness.
One location where stocks accumulated is China. China has had a series of large harvests and China’s reserve system has been holding onto the high level of imports dating back to 2023/24. With higher reserves, China has been importing less fiber, and this has been a factor contributing to larger stocks in exporting nations, including Brazil and the U.S.
In addition, there are downside risks to demand-side estimates. Inflation, geopolitics, and macroeconomic conditions may impact consumption and could reduce the actual size of the global production shortfall relative to current predictions.
How the eventual balancing of demand shakes out against a backdrop of lower production can be expected to influence where prices may go from here. A slight increase has already been registered, and further adjustments may or may not be needed.
Key Takeaways
The cotton market has been in transition, migrating from an extended period of abundance to one with some tightening. Warehoused stocks are available to be leveraged against the expected shortfall in global production relative to mill-use, but prices above year-ago levels can be justified. Macro and geopolitical concerns remain and remain unknowable but may also be the biggest variable to watch in terms of the ability to move prices meaningfully outside of their current range. Traceability and the use of U.S. cotton may unlock tariff benefits.
HGI: What factors are having the biggest impact on prices? What indicators should the industry keep an eye on?
JD: There has been an amazing amount of volatility in the world in recent years. Even extending back less than a decade, the global sourcing environment went through the reversal of policies oriented towards free trade, COVID, the unprecedented stimulus that followed the pandemic, the strongest inflation in more than a generation, and the outbreak of several major conflicts.
As with many markets, these events have driven some of the largest changes in cotton supply and demand. Their evolution, in addition to any other unforeseeable developments, can be expected to continue to have a major impact on price direction.
Aside from these macro factors, fine tuning of the supply and demand situation will be something to watch. For production, the weather remains a key variable this time of year. For demand, how consumers respond to this latest bout of inflation may be influential.
Separate from the pricing situation, another issue that U.S. retailers and brands may want to pay attention to are the efforts being made to offer incentives for the use of U.S. cotton in apparel and textile imports.
Tariffs may be heading to another period of updates, with Section 122 duties set to expire in late July. Section 301 investigations into forced labor and excess capacity could be used to justify another round of tariffs next month.
In some of the language that accompanied the release of USTR findings concerning forced labor, there were carve outs for imports made with U.S. content, including the use of U.S. cotton.
Details concerning the implementation of additional Section 301 tariffs remain unknown, but the possibility of these benefits can raise the return for traceability efforts throughout supply chains.
Jon Devine, chief economist for Cotton Incorporated, provides strategic economic analysis and market intelligence on the factors shaping the global cotton industry. His insights help industry stakeholders understand fiber market trends, supply and demand dynamics, and the broader economic forces influencing cotton’s role in an evolving textile marketplace.
This story originally ran as part of HGI’s 2026 Fiber Outlook Report. To learn more about how geopolitical conflict, shifting trade policy, climate risk, new sustainability regulations and evolving consumer expectations are affecting how natural and man-made fibers are produced, sourced and priced, download the report here.
