I think I found ONE cotton "node" in Stormhaven entirely by accident --- saw the Interaction icon flash as I was running and stopped. Talk about hard to see! I thought I'd never invest in the Keen Eye skills from crafting because I thought, hell, I can see that Oak Log from a mile away! And even that Jute plant sticks up WAY taller than nearby foliage and is bright orange/yellow to boot! But while I have gotten a LITTLE better at spotting Flax in the wild, cotton... not so much. I can only imagine how hard the higher level crafting ingredients will be to spot!
Honestly, cotton's pretty much everywhere, so I'm not sure why you haven't been able to find it. It even goes into Eastmarch and is pretty common there as well. So if you can't find any in Shadowfen and are able to deal with the higher level mobs in Eastmarch, then I'd try there. Try getting the perk that highlights clothing nodes for you, since that's how I'm finding so much. They can be a little more difficult to see since they look a little bit like Lady's Smock.
I'm only half way through Stormhaven and I've found exactly one cotton node and I think two Beech wood nodes, so I'm guessing those are next-tier resources that are just starting to become available in that half of Stormhaven. Orichalcum (however it's spelled) also appears to be a rare higher-tier resource that occasionally spawns in the lower-tier areas.
Rivenspire is full of cotton...I believe I started seeing it around lvl 18-20th. So maybe towards the end of your second area, and definitely in the third for your faction.
Leather? Good luck. Leather only drops from lvl 28 and lvl 30 mobs, and then it's a crap shoot whether or not they even drop one. Drop rate is horrible compared to other raw materials.The best place I have found so far for leather is at the southern most part of the Shadowfen, but be warned, you will die...alot. I hope that Zeni fixes this. This can't not be right.
As for Cotton, if you travel from Stormhold and go south you will find plenty of cotton. Cotton is everywhere in Shadowfen!
Thanks everyone for the responses. Since I posted the initial questions I've found out a few things.
Cotton is indeed out there. It's just a bit harder to see. Look for little white flowers.
Leather does not start to drop until you are at least level 26, or kill enemies who are 26. Once you hit 26 and kill enemies who are at least 26 you should start to see it drop. But the drop rate seems not be very high. In Shadowfen I found a good spot to be closer to the southern part near where the ogres roam.