US Cotton Futures Rise for Third Straight Day, 80 Cents Becomes Key Battleground

The strength in grain markets is injecting new momentum into cotton futures. On July 1, ICE cotton futures rose for the third consecutive day, with the active December contract gaining 1.04 cents to settle at 77.84 cents per pound, reaching the highest level since June 24. This move is not isolated but a typical reflection of cross-commodity linkages.

Grain Market Drives Cotton Rebound

The collective rally in Chicago corn, wheat, and soybean futures provided direct support for cotton. A vice president at Price Futures Group noted that the strong performance in grains was the core driver of cotton's rebound. In the short term, prices may challenge the 80-cent mark again. This psychological level is not only a key technical resistance but also affects downstream buyers' cost expectations.

Notably, the trading range for cotton futures was between 76.44 and 78.50 cents per pound, indicating intense battle between bulls and bears at current levels. For textile mills, this price volatility means a narrowing window for raw material procurement.

Supply Side Data Exceeds Expectations

The latest USDA planting area report showed that 2026 US cotton planted area reached 9.85 million acres, higher than the analyst average estimate of 9.636 million acres. This suggests that new crop cotton supply may be more ample than previously anticipated. Meanwhile, cotton planting is 97% complete, in line with the five-year average, with normal growth progress and no significant weather disruptions.

The expectation of looser supply theoretically puts pressure on prices. However, the current rebound indicates that the market is more focused on demand-side changes, particularly the upcoming weekly export sales report, which will directly reflect global buyers' appetite for US cotton.

External Environment Becomes Complex

Falling crude oil prices added uncertainty to the cotton market. On July 1, US oil fell over 1% to a four-month low as progress in US-Iran talks eased supply concerns. Weaker energy prices typically lower chemical fiber production costs, potentially putting pressure on cotton demand through substitution effects.

Additionally, a stronger US dollar and a slight decline in US stocks reflect cautious macro sentiment. For export-dependent textile firms, a stronger dollar means higher import costs for dollar-denominated cotton, but may also dampen procurement appetite in other currencies.

Industry Impact and Strategies

Current cotton prices are in the 77-78 cent range, just one step away from 80 cents. For textile mills, this price level presents both opportunity and risk. If export sales data is strong, prices may quickly break through 80 cents, significantly raising procurement costs. Conversely, if demand disappoints, prices may retreat to the 75-cent support level.

For Buyers - Monitor the July USDA export sales report; if export commitments exceed 200,000 bales, consider increasing raw material inventory to lock in costs. - Build positions gradually in the 77-78 cent range, avoiding chasing prices above 80 cents. - Closely track grain market trends; if corn and wheat continue to rise, cotton prices are more likely to follow.

For Exporters - In a strong dollar environment, export quotes can be adjusted upward to hedge exchange rate risks, but monitor buyer acceptance. - Use futures hedging tools to lock in profits on forward orders; consider building short positions gradually in the 78-80 cent range. - Monitor the impact of US-Iran talks on crude oil prices; if oil continues to fall, chemical fiber substitution may strengthen, and cotton demand could face adjustments.