The 80-cent-per-pound mark has once again become the focal point of a tug-of-war between bulls and bears. On July 9, ICE cotton futures fell for a second consecutive session, with the December contract closing at 80.63 cents/lb, down 0.05%, following a 3.8% surge on Tuesday that pushed prices to a one-month high. Profit-taking dominated the session, but strong US export sales data and persistent El Niño expectations provided underlying support from both the demand and supply sides.
Profit-Taking and Cost Pass-Through StoneX Consulting Senior Vice President Bailey McHenry noted that a small amount of capital flowed out of the market as some speculators locked in profits after the recent rally. However, strong technical support emerged at the 40-day moving average, from which prices rebounded to recoup some early losses. This suggests limited downside in the near term, with robust buying interest around the 80-cent level.
Additional pressure came from the energy market. Oil prices fell about 2% on the day, lowering production costs for polyester fiber—a substitute for cotton—and indirectly weakening cotton's relative competitiveness. For downstream spinning mills, the substitution effect becomes more pronounced when chemical fiber prices decline, potentially delaying cotton restocking decisions in favor of more cost-effective synthetic options.
Strong US Export Data Provides Floor Support The USDA's weekly export sales report for the week ending July 2 showed net sales of 66,400 bales of upland cotton for the current marketing year, up 36% from the previous week. Net sales to China stood at 3,294 bales. For the next marketing year, net sales reached 86,971 bales, while shipments totaled 230,056 bales, up 5% week-over-week. Although shipments to China were only 1,645 bales, the overall improvement in export demand is clear.
This data provides significant psychological support to the market. Profit-taking after a rally is a normal technical adjustment, but the acceleration in export sales indicates that overseas buyers accept current price levels, helping to solidify the price floor. For Chinese cotton importers, it is essential to monitor US shipment schedules and freight rate changes to avoid disruptions caused by short-term price volatility.
El Niño Strengthening: Texas Yield Expectations Rise Weather is becoming a key variable affecting 2026/27 US cotton output. The US Climate Prediction Center's latest report indicates a 97% probability that El Niño will strengthen by year-end and persist into early spring 2027. El Niño typically brings more rainfall and moisture to key growing regions like Texas, boosting yields and reducing abandonment rates.
If this weather pattern materializes, US cotton production could exceed market expectations, putting pressure on deferred contracts. However, for cotton plants currently in their critical growth stage, ample precipitation would alleviate drought concerns, and lower abandonment rates could mean actual harvested acreage exceeds initial planting estimates. The market will look to the upcoming USDA monthly supply-demand report for updated production forecasts.
Grain Market Linkages and Report Expectations Chicago Board of Trade corn, wheat, and soybean futures fell for a second consecutive session on Thursday as weather-driven gains faded. The pullback in grains weakened cotton's relative value support, but overall volatility in the agricultural complex remains elevated. Traders are awaiting the USDA monthly supply-demand report, due at midnight Saturday Beijing time, which will provide updated global and US cotton balance sheets—the key determinant of the next price direction.
On the currency front, the US dollar index fell on the day, providing some support for dollar-denominated cotton prices. In equities, the Nasdaq Composite closed sharply higher, led by a semiconductor rally, indicating improved macro risk appetite, which also helps ease selling pressure in commodity markets.