On June 11, the ICE cotton futures market experienced a long-awaited strong rally. The most active December contract settled at 76.36 cents per pound, up 1.41% on the day, while the nearby July contract surged 1.95% to close at 72.49 cents. The direct catalyst was the USDA's June supply-demand report and weekly export sales report, both of which released clear bullish signals.
Supply-Demand Report: Lower Stocks, Higher Consumption, Marginal Improvement
The USDA made key adjustments to the 2026/27 global cotton supply-demand outlook in its June report. On one hand, global supply estimates were lowered while global consumption estimates were raised; on the other hand, US beginning and ending stocks were also revised downward. This combination directly reversed previous market concerns about oversupply. A StoneX senior broker noted that the US export estimate was raised by 200,000 bales to 12.2 million, a target considered quite feasible given current export pace. After the report, the July contract saw a modest recovery driven by short covering and technical buying.
Export Sales: China Net Sales Decline, but Overall Demand Resilience Remains
The weekly export sales report released on the same day further reinforced the bullish sentiment. For the week ending June 4, current-year US cotton net sales were 207,032 bales, up 12% from the previous week and 60% above the four-week average. Forward sales for the next marketing year were also strong, with net additions of 298,689 bales. Notably, net sales to China were negative (-5,494 bales), indicating a slowdown in Chinese buying pace, but overall demand resilience still supported market confidence. Export shipments remained above 300,000 bales, suggesting no significant logistical disruptions.
Brazil Production Cut: South American Supply Pressure Eases Marginally
On the supply side, Brazil's Conab provided additional support. Conab lowered its 2025/26 Brazil cotton production estimate to 3.9784 million tons, a 2.5% year-on-year decline. Although the yield estimate was slightly raised by 0.6%, the drop in total output means competitive pressure from South America is marginally easing. For global textile mills, reduced Brazilian cotton supply could push up their procurement costs, potentially affecting their fiber blending strategies.
Mixed Macro Factors: Oil and Dollar Become Short-Term Variables
Despite the bullish fundamentals, macro-level crosscurrents persist. International oil prices fell on the day as expectations of eased geopolitical tensions weakened the cost support for synthetic fiber substitutes. Meanwhile, the US dollar index fluctuated after the data release, with a stronger dollar naturally capping dollar-denominated cotton prices. Weakness in the grain market also limited cotton's upside. Overall, the current price rebound is more driven by improved supply-demand expectations and short covering than by a substantial breakout in end-user consumption.
Industry Impact: Mill Procurement Windows and Hedging Strategy Adjustments
For downstream textile mills, this ICE cotton rally suggests the raw material cost floor may have been set. Mills that had been on the sidelines should closely watch support at the 76-77 cents level for the December contract. If prices pull back to the 72-73 cents range, it could represent a phased restocking opportunity. However, uncertainties such as the Fed's policy path and US-China trade relations remain, so chasing prices higher is not advisable. For traders with import quotas, consider locking in processing margins by selling hedges at the rally's peak.