US cotton spot prices extended their decline in early July. According to the USDA's weekly report released on July 3, the average price for base-quality cotton across seven designated markets fell 133 points to 69.51 cents/lb for the week ending July 2. Despite the week-on-week drop, the price remained 6.6% higher than the 65.19 cents/lb recorded a year ago. ICE cotton futures followed suit, with the active December contract settling at 77.12 cents/lb on Thursday, down 0.92% for the session.
Price Decline Meets Surging Volume
A notable divergence emerged between price and volume. Cumulative spot sales for the 2025/26 marketing year, which began August 1, reached 1,520,294 bales, a 55% surge compared to 981,244 bales at the same point last year. This suggests that mills and traders are aggressively locking in supplies during the price dip, particularly through on-call purchases tied to the new crop. The daily trading range of 68.82 to 70.44 cents/lb indicates strong buyer interest at lower levels.
From a basis perspective, the current spot-to-futures discount stands at approximately 7.61 cents/lb, near a one-year high. This presents an opportunity for mills with on-call capabilities to decouple procurement costs from futures volatility. For smaller buyers accustomed to fixed-price purchases, however, a widening basis could lead to hidden cost increases.
Weather Divergence Adds Supply Uncertainty
Weather conditions across the US cotton belt were sharply divided during the report period, directly impacting yield potential and harvest timing.
In the Southeast, sunny and hot weather prevailed, but rainfall was uneven. Alabama and Georgia received 0.5 to 1 inch of scattered precipitation, offering some relief to drought-stressed coastal areas, though deeper soil moisture remained insufficient. As of June 29, Alabama's squaring rate reached 53%, Georgia 46%; boll-setting rates stood at 13% and 8%, respectively. North Carolina and Virginia saw squaring progress to 48% and 42%. Crop ratings were "fair to good," meaning sustained heat without adequate rain could pressure yields.
The Southwest presented a more complex picture. East and South Texas experienced hot, dry conditions with daytime highs of 95-99°F. Early-planted fields in the Lower Rio Grande Valley were in the sixth week of bloom, with some bolls beginning to open. In West Texas, Kansas, and Oklahoma, extreme heat (up to 105°F), high winds (gusts up to 110 mph), hail, and Saharan dust clouds damaged some fields. Crop adjusters have assessed the damage, and some fields have been released from adjustment. The region will need consistent, gentle rainfall throughout the growing season to support yield potential.
Implications for Global Mill Procurement
The core tension in the US cotton market lies between ample near-term supply (high carryover stocks) and medium-term weather risk (new-crop yield uncertainty). For mills in China, Vietnam, and Bangladesh, this requires more nuanced procurement strategies.
On one hand, ICE cotton finds strong technical support around 77 cents/lb, limiting further downside. On the other, the widened spot-to-futures discount offers buyers a chance to "buy time." Mills with forward orders are advised to increase on-call purchases to lock in basis costs while retaining some exposure to potential weather-driven rallies.