Weather vs. Report: US Cotton Futures Repricing at 80 Cents Threshold

Cotton futures on ICE are wrestling around the 80-cent mark, caught between a bearish USDA supply report and supportive weather concerns. On July 10, the December contract settled at 81.54 cents/lb, up 0.91 cent but having dipped intraday after the US Department of Agriculture released its July WASDE report. The week's gain of 5.7% shows market sentiment remains driven by production risks.

Supply Report: Higher Output, Rising Stocks The USDA raised its 2026/27 US cotton output estimate from 13.3 million bales in June to 13.7 million, a 3% increase. Ending stocks rose from 3.7 million to 4.1 million bales. Global supply was also revised up by 300,000 bales. The report initially pressured prices, but the impact was limited as the market had partly priced in the numbers.

For Chinese textile mills, higher US production implies potentially lower forward procurement costs, provided weather risks do not materialize.

Weather Wildcard: West Texas Dryness, Indian Monsoon Woes The real support above 80 cents comes from adverse weather. West Texas, the main US cotton belt, forecasts dry conditions for the next 10 days, threatening yields. Meanwhile, India's monsoon is running irregularly, risking planting progress. Any price above 80 cents now reflects a weather premium. If drought persists, actual output could fall short of the USDA's 13.7 million bale estimate.

Cross-Market Rallies: Grains Strengthen Inflation View On July 10, CBOT corn rose nearly 2%, and US soft red winter wheat surged over 3%, partly on renewed Russia-Ukraine tensions. Stronger grain prices reinforce agricultural inflation expectations and will influence US farmers' planting decisions next season. The US dollar index firmed, typically a headwind for cotton, but was offset by weather factors. Crude oil edged lower, leaving cotton's relative competitiveness unchanged.

Spot Market: Cotlook A Flat, Mills Wait Cotlook A index held at 89.75 cents/lb, an 8-cent premium over futures. Chinese importers, the world's largest buyers, remain cautious. The 80-cent level is a key pivot: persistent dryness could push prices to 85 cents; rains could trigger a pullback to 78-80 cents.

Practical Advice ### For Buyers - Build long positions gradually near 80 cents to avoid chasing a weather-driven rally. - Monitor West Texas rainfall forecasts; if no effective rain in 10 days, accelerate price fixing.

For Exporters - Lock in partial profits on US cotton export contracts above 81 cents, hedging against a potential correction from revised supply data. - Track Indian monsoon progress; a shortfall could lift global prices, prompting early procurement or forward shipping.