As 2025 draws to a close, the Intercontinental Exchange (ICE) cotton market has witnessed a strategic reversal, with prices rebounding from a multi-week low of 63.1 cents per pound. This late-December surge is primarily driven by aggressive speculative short covering and a depreciating US dollar, which has fallen by 0.3 per cent against major currencies despite robust domestic growth data. By December 24, the most active March 2026 futures settled at 64.24 cents, signaling a cautious but clear shift in sentiment as the textile supply chain prepares for 2026.

Export surge as Asia capitalizes on lower basis

The dip in prices towards the 63-cent mark acted as a ‘buy’ signal for major Asian textile hubs, particularly Vietnam and Bangladesh. US export sales for the week ending December 11 skyrocketed to 304,700 bales, a staggering 99 per cent increase over the previous week. This influx of orders is providing much-needed liquidity to the apparel sector, where manufacturers are balancing rising energy costs against more affordable raw fiber. We are seeing a 'flight to affordability' where cheaper US cotton is being locked in to hedge against projected supply tightness in early 2026, noted a senior analyst at Fibre2Fashion.

Supply constraints loom over 2026 production

While short-term technicals favor the bulls, the broader sector faces a tightening supply outlook. The USDA’s December WASDE report slashed global production estimates by 300,000 bales, bringing the total to 119.79 million bales. Furthermore, certified ICE stocks have dwindled to 11,600 bales, down from over 12,000 earlier in the month. For apparel brands, the challenge in 2026 will be navigating this supply-demand imbalance, as a projected 10-11 million sq ft expansion in retail leasing globally continues to drive the underlying need for finished cotton goods.