Cotton futures experienced a technical correction on July 8 after rallying nearly 5 cents over seven to eight consecutive sessions. The ICE December contract settled 0.62 cents lower at 80.67 cents per pound, down 0.76%, retreating from the previous session's one-month high. The pullback was driven primarily by profit-taking rather than a fundamental shift, as longs reduced positions near a key resistance zone.
Profit-Taking and Dollar Pressure
Market participants widely attributed the decline to profit-taking. After the rapid rally, speculative funds chose to lock in gains as prices approached the 81.50-82 cents resistance area. A stronger U.S. dollar, which rose to a one-week high, also weighed on dollar-denominated commodities. However, rising crude oil prices helped limit cotton's losses, as higher oil raises the production cost of polyester, improving cotton's relative competitiveness.
From an industry perspective, textile mills significantly slowed their buying pace above 80 cents. Observers noted that inquiry and fix-price activity dropped sharply near 81.50 cents, confirming that zone as a near-term resistance level.
Crop Conditions Deteriorate: Supply Concerns Linger
Despite the short-term pressure, the new-crop U.S. cotton outlook remains uncertain. The latest USDA crop progress report showed the cotton crop rating good-to-excellent at only 46%, down from 48% the prior week and well below 52% a year ago. While squaring reached 49%, slightly above the five-year average, the declining condition score suggests potential yield downgrades later in the season.
For buyers, this means that while prices near 80 cents face downward pressure, the downside may be limited. If the upcoming USDA WASDE report lowers U.S. production estimates, the market could quickly regain upward momentum.
Key Report Week: Exports and Supply-Demand Data
This week is data-heavy for cotton markets. Thursday's export sales report will reveal actual U.S. cotton commitments, especially from top buyers China and Vietnam. Friday's WASDE report is the monthly highlight, with the market focused on changes to global 2026/27 ending stocks.
In neighboring markets, CBOT soybeans also fell from seven-week highs on profit-taking, reflecting a cautious tone across the ag complex. But crude oil's firm tone continues to provide a floor for cotton via the polyester cost channel.