US cotton spot markets experienced a sharp rally in early July, but volumes simultaneously contracted—a divergence that warrants caution across the textile supply chain.
Price Spike Meets Volume Collapse
According to the latest USDA weekly data, the average spot price for base-quality cotton across seven designated markets reached 72.98 cents/lb for the week ending July 9, up 347 points from 69.51 cents/lb the prior week and 9.34 cents higher year-on-year. Intra-week volatility was notable, with prices ranging from a low of 71.11 cents on July 6 to a high of 74.10 cents on July 7.
However, spot volumes plunged to just 1,732 bales, down 55% from 3,865 bales the previous week and below the 2,739 bales recorded a year ago. While cumulative volumes for the current marketing year stand at 1.522 million bales, up 54.7% year-on-year, the short-term divergence between price and volume signals growing disagreement between buyers and sellers at current levels. Sellers are holding back in anticipation of further gains, while buyers refuse to chase prices higher, leading to a sharp drop in liquidity.
ICE December futures settled at 80.63 cents/lb on Thursday, down 0.05%, but had surged 3.8% on Tuesday to hit the highest level since June 2. The contrast between bullish futures and lethargic cash markets suggests speculative capital and industry capital are diverging in their outlook.
Regional Weather and Crop Progress Diverge
The USDA Crop Progress report released July 6 shows the Southeast progressing normally: Alabama's squaring rate reached 64%, Georgia 63%; boll-setting rates were 22% and 14% respectively, with crop conditions mostly rated "good." This region is providing a solid base for production.
The Southwest tells a different story. Spot trading in East and South Texas is nearly dormant, with minimal supplies. While crops are growing in muggy conditions, more rain is urgently needed. In the Lower Rio Grande Valley, bolls are cracking and harvest preparations are underway, but high whitefly populations raise concerns about yield impact. In West Texas through Kansas, daytime highs range from 95-102°F, nighttime lows 60-79°F, with only scattered rainfall up to 1.25 inches—many areas remain dry. Some fields have suffered from high winds and hail. Dryland cotton progress depends entirely on follow-up rains.
This "stable Southeast, dry Southwest" pattern means new-crop US cotton output may be regionally uneven—the Southeast can deliver steady volumes, while the Southwest's contribution hinges on rainfall in late July through August. For buyers, this implies potential divergence in quality and delivery timing by origin.
Downstream Procurement Strategies Diverge
Domestic mill inquiries reflect caution. Mills focused on color grade 42+, leaf 4+, staple 35+ cotton for Q3-Q4 2026 delivery, but no trades were reported. Yarn demand remains slow to moderate, and mills are maintaining a cautious stance between cotton procurement and finished goods orders, unwilling to build inventory at elevated prices.
On the export side, Far East agents are concentrating on discounted grades, with inquiries primarily from India, Pakistan, and Vietnam. These price-sensitive spinners pivot to lower-grade or discounted cotton when US spot prices rise rapidly. In West Texas, mixed lots of 2025-crop cotton (grade 13+, leaf 5+, staple 34-38) traded at 68.00-70.00 cents/lb, creating a 3-5 cent spread versus base quality—a spread that is attracting Southeast Asian buyers.