Global Cotton Shortage Fuels Shift in Trade Amid US Drought and China Sanctions

Global cotton production has fallen short of its anticipated targets, with the International Cotton Advisory Committee (ICAC) reporting a total output of 25.5 million tonnes last month, missing the 25.9 million tonnes initially forecast. This shortfall underscores a growing trend in the global supply chain, where the country of origin of cotton is increasingly influencing customs procedures and market dynamics worldwide.

The primary driver behind this decline was the United States, which ranks as the world’s fourth-largest cotton supplier. US output experienced a significant drop of 400,000 tonnes. Further reductions in harvest were also observed in Pakistan and Sudan, with their respective outputs falling by 100,000 and 50,000 tonnes. These combined declines have contributed to a tightening global supply, impacting various segments of the textile industry.

The considerable fall in US cotton production is largely attributed to prolonged drought conditions that have affected major cotton-producing states. This environmental challenge, coupled with persistent trade tensions between Beijing and Washington, has dramatically altered US cotton export patterns. Exports of American cotton to China have plummeted from accounting for 40% of total exports to a mere 8% within a single year. Consequently, American cotton is now predominantly directed towards new key markets, including Vietnam, Pakistan, Turkey, and India.

Meanwhile, several Asian nations specializing in textile and garment manufacturing are strategically turning to US cotton to navigate complex customs sanctions and regulations. Countries such as Bangladesh, Pakistan, Indonesia, and India—the latter being the world’s second-largest cotton producer after China—are adopting this sourcing strategy. However, the sustainability of this approach is being questioned, as a continued tightening of US cotton supplies could render this solution short-lived and potentially lead to further supply chain disruptions.

Simultaneously, the global cotton market is grappling with bans on large volumes of Chinese cotton in multiple international markets. These bans are a direct consequence of widespread concerns over alleged forced labor practices involving the Uyghur population in China’s Xinjiang region. This dual pressure—reduced US output and restrictions on Chinese cotton—is profoundly reshaping sourcing decisions and sparking new anxieties regarding price stability in the near future.

Based on current supply and demand dynamics, the ICAC has provided price projections for the 2025–26 season. Cotton prices are estimated to range between 60 and 96 cents per pound, with a median projection set at 76 cents. Despite these market shifts, cotton remains a crucial commodity, representing approximately 20% of global fiber production. It holds the distinction of being the second most-produced fiber worldwide, trailing only polyester (57%), and significantly ahead of cellulosic fibers (5%), which are derived from chemically processed plant materials.