CT SPECIALIST · Softs / US Weather
Z20943 – [CT] Texas USDM Drought Signal
Texas D2-D4 drought coverage during the April-August cotton growing-season window compresses US cotton yield and transmits supply-stress regimes to Cotton futures at 60-day horizons.
At a glance
DORMANT · WAITING FOR APR
Current reading
-0.000
SEASONAL STATE
DORMANT · WAITING FOR APR
Off-season composite tracks residual drought carry; Texas cotton window runs April…
Signal state
TX Normal
46 days in Neutral phase
Updated
Nov 04, 2026
USDM weekly release
Sample
26-year window
Weekly cadence; 2000 onward
As of Nov 04, 2026. Updated nightly. · NEXT WINDOW APR-AUG TEXAS COTTON GROWING-SEASON WINDOW
SIGNAL OVERVIEW
The US Drought Monitor (USDM) publishes weekly drought coverage estimates with intensity categories D0 (abnormally dry) through D4 (exceptional drought). Texas produces roughly 40 percent of US cotton; the Texas High Plains and Rolling Plains cotton regions are especially vulnerable to drought during the April-August growing-season window. The signal takes the weekly percentage of Texas in D2 (severe) through D4 (exceptional) drought categories during the April-August window and z-scores. Daily Spearman IC against Cotton forward 60-day returns is minus 0.101 at p-value 1.0e-16 across 6,676 observations, strongly significant on the 26- year sample. The signal is empirically contrarian with negative IC; Texas drought regimes historically mark peak supply-shock pricing with subsequent mean reversion, while benign Texas regimes mark cycle-low bases with subsequent recovery.
LIVE CHART
CT Texas USDM Drought Signal
What the chart is showing right now. The dark line is the USDM Texas D2+D3+D4 drought coverage percent z-score during the April-August cotton growing-season window, tanh- bounded. Positive composite means elevated drought stress; negative composite means benign conditions. The bronze line in the middle panel is ICE US Cotton No. 2 first-nearby. The bottom panel tracks the trailing 252-day Spearman information coefficient between the composite and Cotton forward 60-day returns.
CHART PLACEHOLDER
Live chart renders here once the Node.js data layer is wired. Until then this slot shows a static placeholder.
COMPOSITE
-0.000 / tanh
STATE
TX Normal
PHASE
-0.00
PHASE +1 EDGE
via mean reversion
PHASE -1 EDGE
cycle-low base
TODAY’S PLAYBOOK READING
STATE
Tx Normal
STATE AND HISTORY
Normal Moisture firing at composite -0.000, 46 trading days running in Neutral phase. Signal is empirically contrarian; Phase +1 (Severe Drought) historically marks supply-shock peaks, Phase -1 (Benign) marks cycle-low bases. Daily Spearman IC minus 0.101 at p-value 1.0e-16 strongly significant.
THE DROUGHT MECHANISM
Texas produces 40 percent of US cotton. D2+D3+D4 drought coverage during April-August compresses yield directly. Severe drought extremes typically coincide with price spikes that are already fully priced; subsequent 60-day returns from drought peaks are historically negative via mean reversion.
HOW TO POSITION
Regional weather overlay for Cotton via Texas USDM drought channel. Severe Drought firings historically mark supply-shock pricing peaks with subsequent mean reversion. Benign Conditions firings mark cycle-low bases. Pair with ENSO La Nina, Vidarbha CHIRPS, USDA PSD, and CFTC positioning.
WHAT THE CHART SHOWS
The composite sits at -0.000 in the Normal Moisture band. Texas USDM D2+D3+D4 drought coverage has tracked near zero through late 2026.
TOP INPUTS FIRING
- Primary composite -0.000 State Normal Moisture, 46 days running in Neutral phase.
- Texas D2+D3+D4 drought near zero Raw z-score -0.00; USDM Texas D2+D3+D4 drought coverage has tracked near zero through late 2026.
- Daily IC strongly significant, contrarian polarity Daily Spearman IC minus 0.101 at p-value 1.0e-16 strongly significant. Negative IC; drought extremes historically mark peak supply-shock pricing with subsequent mean reversion.
THE TAKEAWAY
What this means for you today
THE DROUGHT CALL
Composite -0.000, Normal Moisture. Texas USDM D2+D3+D4 drought coverage has tracked near zero through late 2026 consistent with benign Texas regime. Signal firing in Normal Moisture bucket for 46 days.
THE EMPIRICAL CONTEXT
Daily IC minus 0.101 at p-value 1.0e-16 strongly significant on 26-year sample. Signal is empirically contrarian; direction of forward returns from drought extremes flips the fundamental supply narrative via mean reversion. Use for regime positioning identification rather than direct bullish signal.
THE HONEST CAVEAT
Non-overlap IC at 60-day sampling minus 0.079 at p-value 0.41 sign-consistent but not independently significant on 112 samples. Signal is seasonal (April-August growing- season window); off-season composite tracks residual carry. Contrarian polarity means drought extremes mark pricing peaks not forward-looking bullish regimes.
THE REGIME MAP
The three phases, forward returns and sample share
Computed from 6,672 post-warmup trading days (2000 onward). Signal is empirically contrarian; drought extremes mark pricing peaks with subsequent mean reversion.
| State | Phase | Share | Fwd 60d | HAC t | Edge vs baseline | Last firings |
|---|---|---|---|---|---|---|
| Severe Drought | +1 | 15.5% (1037 d) | -3.62% | -4.96pp | Apr 2026, Apr 2025, Aug 2023 | |
| Normal Moisture TODAY | 0 | 66.1% (4410 d) | +2.34% | +1.00pp | Sep 2026, May 2026, Sep 2025 | |
| Benign Conditions | -1 | 18.4% (1225 d) | +2.00% | +0.66pp | Jun 2026, Jul 2025, Apr 2024 |
The historical pattern
Signature episodes in the 26-year sample
What this measures
Z-score of USDM Texas D2+D3+D4 drought coverage percent during April-August cotton growing-season window, tanh-bounded. Positive composite equals elevated Texas drought stress. Signal empirically contrarian on Cotton forward 60-day returns. Target ICE US Cotton No. 2 first-nearby back-adjusted close.
Why it matters
Why Texas drought matters for Cotton
Texas produces roughly 40 percent of US cotton. The Texas High Plains and Rolling Plains cotton regions are especially vulnerable to drought during the April-August growing-season window. D2 (severe) through D4 (exceptional) drought coverage during this window compresses yield directly. The 2011 and 2022 Texas drought episodes are the two largest Texas-driven US cotton supply shocks of the 21st century; both coincided with Cotton price spikes that subsequently mean-reverted at 60-day horizons.
How to use this signal today
Regional weather overlay for Cotton via the Texas USDM drought channel. Severe Drought firings historically mark supply-shock pricing peaks with subsequent mean reversion. Benign Conditions firings mark cycle-low bases with subsequent recovery. Pair with ENSO La Nina (climate macro top-of-funnel), Vidarbha CHIRPS and Pakistan Punjab CHIRPS (South Asian supply), USDA PSD production, and CFTC positioning.
Risk overlay
Daily IC strongly significant on 26-year sample but non-overlap test minus 0.079 at p-value 0.41 sign-consistent but not independently significant on 112 samples. Signal is seasonal (April-August growing-season window); off-season composite tracks residual carry. Contrarian polarity means drought extremes mark pricing peaks not forward-looking bullish regimes; use for regime positioning identification alongside exogenous supply signals.
Signal consumers and siblings
Not investment advice · The analysis on this page is informational and educational. Signal readings, historical case figures, and empirical statistics are derived from publicly available data and are provided without warranty. Hypothetical performance results have inherent limitations, including the benefit of hindsight. Readers who intend to trade should consult a licensed investment professional and see the research brief for the full disclaimer.
Last refreshed Nov 06, 2026 11:57 AM ET