ICE cotton futures posted a second consecutive loss on Thursday, with the December contract settling at 80.63 cents per pound, down just 0.05%. The minute decline masks a tug-of-war between profit-taking and strong fundamentals—speculators locked in gains after a 3.8% rally earlier this week, while the USDA's weekly export report provided a solid floor under prices.
Export Data Show Strength, but Structural Issues Persist
The USDA's weekly export sales report for the week ending July 2 showed net upland cotton sales of 66,400 bales for the current marketing year, up 36% from the previous week, including 3,294 bales to China. New-crop sales reached 86,971 bales, and shipments totaled 230,056 bales, a 5% increase week-over-week. These figures indicate that overseas mills' demand for U.S. cotton remains robust, with early commitments to new-crop supplies reflecting cautious downstream planning.
However, shipments were still 14% below the four-week average, and those to China were just 1,645 bales. This suggests that the actual logistics flow has not fully kept pace with the pace of signings, with port efficiency or vessel scheduling still acting as hidden bottlenecks. For Chinese textile mills, uncertainty in the arrival time of foreign cotton may complicate raw material inventory management.
El Niño and Oil Prices: Forces in Opposite Directions
The U.S. Climate Prediction Center raised the probability of El Niño strengthening by late this year and persisting into early spring 2027 to 97%. For key growing regions like Texas, this typically means more rainfall and humidity—factors that can boost yields and lower abandonment rates. If the weather forecast materializes, the 2026/27 U.S. crop production outlook could be revised upward, putting medium-to-long-term pressure on prices.
At the same time, crude oil fell about 2%, reducing the production cost of polyester fiber and making cotton less competitive against synthetic alternatives. The current correlation between ICE cotton and crude oil remains strong, and geopolitical-driven oil price swings quickly transmit to the cost comparison within the textile chain.
The 80-Cent Threshold and Its Industrial Implications
Technically, the 40-day moving average has provided solid support, with StoneX analysts noting the market bounced from that level and recovered some earlier losses. But the settlement at 80.63 cents leaves prices just a stone's throw from the psychological 80-cent mark. A break below that level could trigger further stop-loss selling. For textile buyers, this level presents both opportunity and risk: lower prices could reduce raw material costs through on-call pricing, but if export data continues to improve combined with weather speculation, a rebound could come quickly.
The concurrent pullback in Chicago grains—corn, wheat, and soybeans falling for a second day—suggests cautious sentiment across the agricultural complex, with traders awaiting the USDA's monthly supply-demand report. That report, due Saturday at midnight Beijing time, will directly influence the market's next direction with its global production estimates for the new season.