ICE cotton futures fell for a second consecutive session on July 9, with the most-active December contract settling at 80.63 cents/lb, down 0.05% from the prior day. The decline came despite a strong weekly U.S. export sales report, as speculative profit-taking and lower crude oil prices offset bullish demand signals. A senior analyst at StoneX noted that fund outflows were the primary driver, but the market found technical support near the 40-day moving average, recovering part of the early losses.
This price action highlights a tug-of-war between solid fundamentals and short-term sentiment. While export data shows resilient demand, macro factors and fund positioning are dictating the near-term rhythm. For textile buyers, the current 'strong data, weak price' scenario may signal a narrowing window for building positions at lower levels.
Strong Export Data, China Returns
The USDA 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 previous week. China purchased 3,294 bales, marking a return after a quiet period. Next-crop sales reached 86,971 bales, indicating solid forward demand. Shipments totaled 230,056 bales, up 5% week-on-week but 14% below the four-week average. Shipments to China were modest at 1,645 bales.
From a regional perspective, shipment efficiency could affect arrival schedules at major Chinese ports such as Qingdao, Zhangjiagang, and Shanghai. Mills relying on U.S. cotton, especially those producing high-count yarns in Jiangsu and Zhejiang, should monitor potential supply gaps caused by shipping delays.
Oil and El Niño: Dual Variables for Costs and Yields
Lower oil prices added pressure on July 9, as crude fell about 2%, reducing production costs for polyester fiber, cotton's main synthetic substitute. This dynamic is particularly relevant in textile clusters like Shengze and Changxing, where shifts in the polyester-cotton price spread influence downstream fabric mills' raw material blending decisions.
On the weather front, the U.S. Climate Prediction Center indicated a 97% probability that El Niño will strengthen by year-end and persist into early spring 2027. For key growing regions such as Texas, El Niño typically brings increased rainfall, potentially boosting yields and lowering abandonment rates. If realized, this could ease supply concerns for the 2026/27 season. Market attention now turns to the USDA monthly supply-demand report, due Saturday Beijing time, which will include the first official production estimates for the new crop.
Grains Retreat, Sentiment Turns Cautious
Chicago corn, wheat, and soybean futures fell for a second consecutive day on July 9 as weather-driven gains faded. The pullback in grains dampened overall agricultural market sentiment, indirectly weighing on cotton. The U.S. dollar index weakened, which theoretically supports dollar-denominated cotton, but this was offset by profit-taking and lower oil.
In summary, the cotton market is caught between export-driven bullishness and fund-led profit-taking. Prices may oscillate around 80 cents in the near term, awaiting a new catalyst—either a surprise in the USDA report or macro volatility from Middle East tensions or inflation data.