Methodology

How we price a bale.

The Cotton Index is a lighthearted purchasing-power measure built on a single standardized object: a base-grade ICE Cotton No. 2 bale. The arithmetic is the same one The Economist uses for a Big Mac. The economics are not — cotton is traded, burgers mostly are not.

The object

ICE Futures U.S. Cotton No. 2 calls for physical delivery of 50,000 pounds of United States growth at a price in cents per pound for Strict Low Middling 1-1/16″ (color 41, leaf 4, staple 34), micronaire 3.5–4.7, strength 26.0 gpt+. Commercial delivery is about one hundred square bales. This index reports a 480 lb USDA statistical bale so world production, mill use and the receipt share a unit.

On 11 September 2026 the Dec 2026 contract settled at 87.24 ¢/lb. One index bale is therefore $418.75. US cash/spot the same morning was 79.98 ¢/lb; Cotlook A, the physical Far-East average, was 92.4 ¢/lb.

Method 1 · Raw index

1. Take a mill-delivered or gin-yard quote for an SLM 1-1/16″ equivalent in local currency.
2. Convert to dollars at the survey-week exchange rate (or at live FX when the toggle is on).
3. Scale to a 480 lb bale.
4. Valuation = (dollar bale − ICE bale) ÷ ICE bale × 100.

Worked example, China. A 3128B mill quote of 118.4 ¢/lb is $568.32 a bale. Against $418.75: ($568.32 − $418.75) ÷ $418.75 = 35.7%. The yuan, in cotton terms, is expensive. Most of that gap is the quota wall, not the exchange rate.

Implied PPP is local bale ÷ ICE bale, in local currency per dollar. If that implied rate is richer than the market rate, the currency is overvalued on this measure.

Method 2 · Basis, not burgers

A Big Mac embeds rent and wages. A bale does not. Law of one price says tradable lint should converge on ICE after freight and quality. The Cotton Index still prints the raw gap because it is comparable across 41 markets, then asks you to read it as a basis:

• West Africa FOB usually sits a few cents under ICE.
• Australian irrigated growth usually sits a few cents over.
• China 3128B sits tens of cents over because of policy.
• Import mills (Bangladesh, Vietnam, Japan) pay A-index plus freight and duty.

The residual after a typical quality-and-freight basis is the currency reading. We do not regress on GDP per head — cotton is not a wage good. We do freeze quotes at the survey week so a noisy FX print cannot rewrite the physical.

Live rates

Default: survey-week FX and the ICE nearby from 11 September 2026, locked with the lint quotes. Toggle on: two feeds move. Mill and gin quotes never do.

• Dollar prices rebuild from open.er-api.com daily USD crosses.
• The ICE nearby is the delayed last on Cotton No. 2 continuous (CT=F), pulled through Yahoo Finance. After the close that last is usually within a few ticks of the official ICE settlement. The listed strip (Oct, Dec, Mar…) updates with it. Not a licensed ICE print.

The US row tracks the live nearby because it is the nearby. Gaps on every other market can drift with the currency, the board, or both — that is the point of the switch. Quotes refresh when you load the page, when you come back to the tab, and every five minutes while the toggle is on. If a feed drops, the label reads FX off or ICE off and the survey snapshot stays put.

Sources

• ICE Cotton No. 2 settlements and contract specs.
• USDA PSD (production, mill use, in thousand 480-lb bales) and Weekly Cotton Review.
• Cotlook A Index and origin differentials.
• CC Index 3128B / Zhengzhou CF for China.
• Shankar-6 Gujarat and Karachi ex-gin for India and Pakistan.
• Mill-delivered import quotes for spinning countries with no crop.

Country rows marked estimate (Iran, several African gins, Turkmenistan) are desk readings, not exchange prints. They stay in the table so the map is honest about thin markets, and they carry a note on the country page.

Download the sheet · Cotton Index is not affiliated with ICE, USDA or Cotlook. Not investment advice.