ICE cotton futures edged lower for a second consecutive session on July 9, as profit-taking offset strong export sales data. The December contract settled at 80.63 cents per pound, down 0.05%, just below the June 2 high reached earlier this week. The market is caught between competing forces, leaving traders watching the 80-cent level for direction.
Export Strength Fails to Halt Profit-Taking
The USDA weekly export sales report for the week ending July 2 showed current-season upland cotton net sales of 66,400 bales, up 36% from the prior week. Next-season sales added 87,000 bales. Shipments totaled 230,056 bales, down 14% from the four-week average but still at a healthy pace. Sales to China were modest at 3,294 bales, with shipments of 1,645 bales.
Despite the bullish data, prices slipped. StoneX senior vice president Bailey McHenry noted minor fund outflows as speculative longs took profits after Tuesday's 3.8% rally. This suggests that while fundamentals are supportive, sentiment remains cautious, and the market needs fresh catalysts to sustain upward momentum.
Oil Weakness vs. Weather Premium
Crude oil fell about 2% on July 9, lowering the production cost of polyester, cotton's main synthetic substitute. When oil prices decline, polyester becomes cheaper relative to cotton, potentially shifting mill demand away from natural fiber. This dynamic is a near-term headwind for cotton prices.
On the other hand, weather conditions are turning more supportive for the US crop. The Climate Prediction Center now sees a 97% probability that El Niño will strengthen through year-end and persist into early spring 2027. For Texas and other key growing regions, El Niño typically brings increased rainfall and humidity, which can boost yields and reduce abandonment rates. While this is positive for supply, it also implies a larger US harvest next season, which could pressure prices further out on the curve.
The 80-Cent Technical Battle
Technically, McHenry pointed out that the 40-day moving average provided solid support, from which prices bounced and recouped early losses. With December settling at 80.63 cents, the psychological 80-cent level is now the key battleground. A hold above this level could extend the recent rebound; a break below would likely trigger stop-loss selling and open the door to a deeper correction.
All eyes are now on the upcoming USDA monthly supply-demand report. Traders will scrutinize any adjustments to global ending stocks and US production estimates. Given the conflicting signals from exports, weather, and energy markets, the report could determine the next directional move.
Industry Implications
For Chinese textile mills, the current consolidation around 80 cents implies a narrowing procurement window. If ICE prices stay under pressure, the domestic-import spread may widen, favoring imported cotton purchases. Conversely, if weather premiums push prices higher, mills should brace for rising raw material costs. Meanwhile, lower polyester costs may encourage a shift in the cotton-polyester blend ratio, dampening cotton demand.