US cotton futures extended gains for a second consecutive session on June 11, with the ICE July contract settling at 72.49 cents per pound, up 1.95%, and the more active December contract closing at 76.36 cents, up 1.41%. The rally was primarily fueled by the USDA's June supply-demand report and weekly export sales data, both of which delivered bullish signals.
Supply-Demand Report: Inventory Cuts and Consumption Upgrade
The USDA lowered its estimates for 2026/27 US cotton beginning and ending stocks, reduced global supply projections, and raised global consumption forecasts. This 'lower supply, higher demand' adjustment directly improved market sentiment. StoneX senior broker Valentin Olah noted the report was fundamentally better than expected, particularly the 200,000-bale increase in US export estimates to 12.2 million bales, a target deemed 'quite achievable.'
Export sales data provided additional support: net sales of current-crop US upland cotton totaled 207,032 running bales for the week ended June 4, up 12% from the prior week and 60% above the four-week average. However, net sales to China decreased by 5,494 bales, indicating lingering uncertainty from the largest consumer. Next-crop net sales reached 298,689 bales, suggesting decent forward demand. Shipments of 300,114 bales were up 12% week-on-week, reflecting continued logistics improvement.
Brazil's Production Cut Adds Support, but Macro Factors Mixed
Brazil's Conab released data showing 2025/26 cotton production estimated at 3.9784 million tons, down 2.5% year-on-year. Although yield per hectare rose 0.6% to 1,969 kg, the overall decline implies tighter supply from the world's second-largest exporter, providing medium-term support. ICE deliverable stocks fell to 192,789 bales from 231,683 bales, also indicating reduced near-term physical availability.
Macro signals, however, were mixed. The US dollar index fell on the report day, favoring dollar-denominated cotton, but crude oil prices declined after President Trump canceled plans to strike Iran, and the grain complex was generally weak, capping cotton's upside. Olah also noted that the July contract's rebound appeared more driven by short-covering and technical support than genuine demand.
Impact on the Supply Chain: Short-Term Bullish, but Buyers Should Beware Correction Risks
For Chinese textile mills, the ICE rally will directly raise import costs. The Cotlook A index remained flat at 83.65 cents per pound, indicating spot prices have not fully caught up. If futures continue rising, landed costs for US and Brazilian cotton will increase, pressuring spinning mills that rely on imported fiber.
However, the sustainability of this rebound is questionable. China, the world's largest cotton consumer, reduced its net purchases last week, implying domestic downstream demand has not yet recovered. If future export sales weaken or the dollar strengthens again, prices could give back some gains. Additionally, the Northern Hemisphere new-crop planting is nearly complete, and weather factors will become a key market variable over the next two months.