ICE cotton futures settled at 78.30 cents per pound on July 6, up 1.18 cents or 1.53% from the previous session, as adverse weather in key US growing regions and a rally in grain markets fueled buying. The most-active December contract broke above the 78-cent threshold for the first time in two weeks.
Weather Dominates Trading
A heat dome—a high-pressure system that traps hot air—continued to blanket the US Midwest and East, bringing record-high temperatures and worsening drought conditions. While scattered weekend rains fell across the southern US, the amounts were insufficient to alleviate moisture stress. The USDA's weekly crop progress report showed the cotton good-to-excellent rating fell to 46% from 48% a week earlier, compared with 52% a year ago. Squaring and boll-setting rates remain near the five-year average, but deteriorating crop conditions raise concerns about final yield potential.
India's Monsoon Adds Pressure
India, the world's second-largest cotton producer, experienced its fifth-driest June since 1901, and the India Meteorological Department expects July monsoon rainfall to remain below average. A weak monsoon could delay planting and stunt early growth, tightening global supply expectations. This factor, combined with US weather woes, is creating a bullish backdrop for cotton prices.
Grain Rally Lends Support
CBOT soybean and corn futures surged over 3% on Monday, driven by similar weather concerns in the Midwest and optimism over demand. The rally in grains often spills over into cotton, as the two sectors compete for acreage and investor capital. Meanwhile, crude oil prices stabilized but remained under pressure from Saudi price cuts and OPEC+ production increases. The US dollar edged higher, but the weather-driven bullish sentiment outweighed the headwinds from currency and energy markets.
Industry Implications and Price Outlook
At 78 cents, cotton is trading near the upper end of its two-month range. For textile mills, rising raw material costs are squeezing margins. If US crop conditions deteriorate further—with good-to-excellent ratings falling below 40%—the December contract could test the 80-cent level. However, if significant rainfall arrives in the next two weeks, a correction is likely. Major buyers including China, Vietnam, and Bangladesh have adopted a hand-to-mouth procurement strategy, waiting for the USDA's July supply-demand report for clearer signals.