US Cotton Rebounds for Third Straight Session: Can the 80-Cent Mark Be Broken?

ICE cotton futures closed higher for a third consecutive session on July 1, with the most-active December contract rising 1.04 cents to settle at 77.84 cents per pound, hitting its highest level since June 24. The rally was directly driven by a sharp rise in the grain market—Chicago corn, wheat, and soybean futures all moved higher, providing cross-commodity support for cotton. A vice president at Price Futures Group noted that prices may challenge the 80-cent mark again in the near term.

Background

The USDA's latest planted acreage report showed 2026 US cotton planted area at 9.85 million acres, above the analyst average estimate of 9.636 million acres. This points to a looser supply outlook for the new marketing year. Meanwhile, crop progress data showed that 97% of US cotton planting is complete, in line with the five-year average, indicating a smooth planting season without significant weather disruptions.

Market attention now turns to the USDA's weekly export sales report due Thursday. This report is a key gauge of actual demand for cotton, especially amid heightened macroeconomic volatility. The strength or weakness of export data will directly affect market expectations for future supply-demand balances.

Industry Impact

From a supply chain perspective, the continued rebound in ICE cotton futures directly impacts the cost of imported cotton for domestic mills. The Cotlook A index stood at 85.55 cents per pound, up 25 points from the previous day, showing clear follow-through in the physical market. For Chinese mills that rely heavily on imported cotton, raw material cost pressures may rise again, particularly squeezing margins for medium-to-low count yarns.

However, it should be noted that this rally is primarily driven by sentiment spillover from the grain market rather than a fundamental improvement in cotton's own fundamentals. The larger-than-expected planted area suggests that new-crop supply could cap price gains in the medium term. Additionally, macroeconomic headwinds persist: crude oil fell to a four-month low, the dollar index strengthened, and US stocks edged lower—all factors that dampen overall risk appetite for commodities, and cotton is unlikely to decouple from this environment.

Practical Recommendations

For Buyers - The current rebound is in progress, but strong resistance exists near 80 cents. If the export sales report disappoints, prices may retest the 76-cent support. It is advisable to avoid large-scale hedging and instead take a phased approach to locking in prices on dips. - Monitor Chinese buyers' pace in weekly US export data. If Chinese commitments remain weak, the rally may be limited. Consider waiting for a pullback to the 75-76 cent range before restocking.

For Exporters - The rally benefits exporters holding low-cost cotton inventories. They can appropriately raise export quotes to reflect higher raw material costs, but should be cautious about buyer acceptance above 80 cents. - Consider using options strategies to hedge against a price pullback, such as buying put options to lock in downside profits while retaining upside potential.