An early-season drought is one of several drivers that have lifted cotton futures to multi-year highs in recent weeks. But the release of a May WASDE report last week that surprisingly forecast cotton yields to increase 14 pounds from last year to 866 pounds per acre took the wind out of the sails of a rally that began in early March.
Footnotes in the WASDE report revealed that the agency uses a simple five-year average for yields that is weighted based on the expected planted acres in each state. While the forecasting method may seem crude, history shows it may not end up being far off the mark.
From 2000 to 2025, the initial cotton yield on average was 48.31 pounds, or roughly one-tenth of a standard bale, different than the final estimate. Historically, even years that saw relatively high amounts of drought in cotton acres to start the season did not experience substantially higher variability between USDA’s initial and final yield estimates. Years where spring drought impacted greater than half of cotton acres saw the final yield estimate miss the mark by 2.81 fewer pounds. This highlights cotton’s ability to rebound from early onset drought in a more efficient manner compared to the other major row crops grown in the U.S.
Still, the drought monitor shows cotton acres impacted by drought at an unprecedented level over the past three months. While it may be too early to write off a recovery for the crop as planting is still underway, and rains are expected to increase in the southern Plains over the next two to three weeks, longer-term expectations of a historically strong El Niño could combine with the drought conditions that are already in place to have a sizable negative impact on yields.