The rally is driven by multiple factors. Drought remains the biggest supply-side risk. According to the U.S. Department of Agriculture, as of March 24, 91% of U.S. cotton-growing areas were under drought conditions, far above the 36% recorded a year earlier. Among these, severe drought accounted for 35% and extreme drought for 17%. Jack Scoville, Vice President of Price Futures Group, noted: "It is very dry in the western Great Plains and the Southwest, so there are concerns about U.S. cotton production." Meanwhile, early planting in key U.S. cotton regions faces severe soil moisture challenges, raising doubts about future yield prospects.

On the macroeconomic front, a weaker U.S. dollar makes dollar-denominated U.S. cotton more attractive to international buyers, boosting export demand. On the fund side, speculative sentiment has turned markedly more bullish. CFTC data show that as of the week ending March 31, the net short position in ICE cotton futures had narrowed sharply to -2.84%, a week-on-week improvement of 7.4 percentage points.

More notably, rising crude oil prices have significantly increased the cost of chemical fibers, shifting some procurement demand toward cotton. Analysts say higher input costs are influencing planting decisions, while higher oil prices make polyester–a substitute for cotton–more expensive to produce. As geopolitical tensions persist in the Middle East, crude oil prices remain elevated, and rising energy costs are increasingly feeding through to the textile supply chain.

Market attention this week will focus on the upcoming USDA supply/demand report. Although adjustments are usually limited ahead of the May new-crop balance sheet, near-term support remains from firm energy markets and persistent drought risks. If drought conditions in key U.S. growing regions do not ease effectively, ICE cotton prices are likely to remain in a rangebound but firm pattern in the near term.