US cotton spot market experienced a notable price jump in the first week of July, but trading volume simultaneously shrank. According to the latest USDA weekly data, the average price for base quality cotton across seven designated markets reached 72.98 cents/lb for the week ending July 9, up 347 points from the previous week and 9.34 cents higher year-on-year. However, weekly spot volume was only 1,732 bales, far below the prior week's 3,865 bales and last year's 2,739 bales. This 'price-volume divergence' typically indicates that the rally is not driven by genuine demand but rather by upstream withholding or speculative buying.
Regional Supply-Demand Temperature: Southeast Tepid, Southwest Divergent
From a regional perspective, US cotton-producing areas show clear temperature differences. In the Southeast (Alabama, Georgia, etc.), spot trading was light. Although crop condition ratings are mostly 'good,' with squaring rates at 64% and 63% respectively, and boll-setting rates between 14% and 22%, mill inquiries focused on forward delivery for Q3-Q4 2026, demanding grades of color 42+ and leaf 4+. Domestic mill yarn demand is slow to moderate, and buyers remain cautious between cotton inventory and finished orders, with no actual deals reported.
The Southwest market is more complex. In East Texas and South Texas, spot trading is virtually inactive, with supply and producer offers extremely limited. While cotton is growing well under muggy conditions, high whitefly populations have been reported in the Coastal Bend region, and lower Rio Grande Valley bolls are cracking, with producers preparing for harvest. In West Texas, Kansas, and Oklahoma, trading is also slow, with daytime highs of 95-102°F, sporadic rainfall insufficient, and some fields affected by strong winds and hail. Dryland cotton is progressing well but remains heavily dependent on continued rainfall.
Futures-Spot 'Scissors Gap': Speculative Capital vs Real Buying
Notably, the most actively traded ICE December cotton futures contract rose 3.8% on Tuesday, July 7, hitting its highest level since June 2, with settlements near 80.63 cents/lb. Yet the weekly spot average was just 72.98 cents, a spread of over 7 cents. This futures premium structure reflects, on one hand, expectations of tighter forward supply—USDA's July 6 crop progress report shows drought conditions persisting in parts of Texas, with hail damage potentially reducing local yields—and on the other hand, speculative capital trading on weather themes.
Export demand shows a 'structural' pattern. Far East agents are mainly inquiring about discounted cotton grades, with interest from India, Pakistan, and Vietnam focused on lower-priced varieties. No actual trade reports were made this week, indicating overseas mills' limited acceptance of current price levels. Season-to-date (since Aug 1) spot total volume is 1,522,026 bales, up 54.7% from 983,983 bales last year, but the bulk of that volume occurred at lower prices earlier. New transactions have clearly slowed as prices break above 72 cents.