International cotton prices are locked in a tug-of-war near the 80 cents/lb mark. On July 9, the ICE December contract settled at 80.63 cents/lb, down a mere 0.05%, marking a second consecutive session of decline. This came after a 3.8% surge in the previous session, which had pushed prices to their highest since June 2. On the surface, profit-taking is the culprit, but the underlying forces are more nuanced: the market is repricing a mix of robust export data, falling substitute costs, and shifting macro expectations.
Why strong export data failed to support prices
The USDA's weekly export sales report for the week ending July 2 showed current-crop upland cotton net sales of 66,400 bales, up 36% from the prior week, including 3,294 bales to China. Next-crop net sales reached 86,971 bales. Shipments of 230,056 bales, while 14% below the four-week average, remain at a high level for the year. This is hardly a weak report, yet the market looked through it.
The reason is that prices had already rallied in anticipation of the data. When the numbers were released, speculative funds chose to lock in profits. StoneX senior vice president Bailey McHenry confirmed this, noting minor fund outflows following the recent rebound. For textile buyers, this means chasing prices above 80 cents carries diminishing returns, and short-term pullbacks should be anticipated.
Falling oil prices: an underestimated bearish channel
Another headwind came from the energy market. Crude oil fell about 2% on July 9, with Brent retreating to around $75/barrel. Lower oil prices reduce the production cost of polyester fiber, making cotton less competitive in the synthetic substitution game.
Given the already weak downstream textile demand, cheaper synthetics further squeeze cotton's market share. For spinners in Southeast Asia and South Asia, cost sensitivity is paramount, and the oil-cotton linkage often outweighs weather factors in the short term. This explains why ICE cotton remains under pressure despite strong export data—end-user affordability is the ultimate price anchor.
El Niño: the biggest variable heading into year-end
Beyond short-term positioning, the key medium-term driver for US cotton is weather. The US Climate Prediction Center has stated with 97% probability that El Niño will strengthen by year-end and persist into early spring 2027.
El Niño typically brings increased rainfall and moisture to key southern US growing areas, especially Texas. For the drought-prone Texas cotton belt, this is a clear positive: higher soil moisture boosts yields and lowers abandonment rates. In 2023, Texas abandonment exceeded 40%. If El Niño materializes as forecast for the 2026/27 crop, US production could recover significantly.
However, there is a timing issue. El Niño's impact on the current crop mainly affects the late growth and harvest stages. The December contract already prices in the 2026/27 new crop, but the market has not fully discounted a potential bumper harvest. Once rainfall data confirms the forecast, the market may face heavier hedging pressure.
Trading logic around 80 cents
In summary, ICE cotton near 80 cents reflects a balanced battle between bulls and bears. Export data provides a floor, while profit-taking and lower oil prices cap upside. Different industry players should adopt tailored strategies.