Global cotton prices are expected to remain firm throughout the second half of 2026 as tightening supply conditions and growing weather-related risks continue to support market sentiment, according to a report by BMI, a Fitch Solutions company.

BMI has raised its 2026 average forecast for ICE-listed second-month cotton futures to 77.0 US cents per pound, up from 71.4 cents, with prices projected to average 80.3 cents in the third quarter and 82.5 cents in the fourth quarter. The revision reflects expectations of a tighter global supply outlook despite softer energy prices.

Global cotton production is forecast to decline 4.4% year-on-year to 120.4 million bales in the 2026/27 season, led by lower output in China and the United States. While India's production is expected to record modest growth, it is unlikely to offset declines from other major producers.

The report highlighted increasing weather risks, particularly in the Southern Hemisphere, where El Niño conditions are expected to intensify during the second half of the year. Australia faces the greatest downside risk due to lower rainfall forecasts and declining water storage levels, with cotton acreage projected to fall sharply in the upcoming season.

Global cotton consumption is expected to continue expanding, reaching 123.2 million bales in 2026/27, resulting in a projected global deficit of 2.8 million bales. However, BMI noted that healthy carryover inventories should help cushion supply disruptions, limiting the likelihood of the sharp price spikes witnessed in 2021 and 2022. Market participants will continue to monitor weather developments, geopolitical risks and global economic conditions as key factors influencing cotton prices in the months ahead.