ICE cotton futures retreated for a second consecutive session on July 9, with the December contract settling at 80.63 cents per pound, down a marginal 0.05% from the previous day. The decline followed a 3.8% rally on Tuesday and was primarily driven by profit-taking among speculative traders and a 2% drop in crude oil prices, which lowers the production cost of polyester, a key substitute fiber.
Profit-Taking vs. Technical Support
StoneX senior vice president Bailey McHenry noted modest fund outflows as speculators locked in gains from the recent bounce. However, the market found solid support at the 40-day moving average, allowing prices to recoup some early losses. This suggests that 80 cents per pound is acting as a near-term technical floor. For textile mills reliant on imported cotton, current prices are above early-June lows but have not yet triggered panic buying.
Oil Slide Pressures Polyester Costs
Falling oil prices directly reduce the feedstock cost for polyester fiber, narrowing the price gap between cotton and synthetics. This dynamic could encourage spinners to increase the share of man-made fibers in their blends, dampening cotton demand expectations. Ongoing geopolitical tensions in the Middle East mean oil volatility will remain a latent variable for the cotton market.
Strong Export Data Provides Underpinning
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% week-on-week. Sales to China totaled 3,294 bales, a modest but positive sign of renewed buying interest. Forward sales for the next marketing year reached 86,971 bales, indicating that long-term demand expectations remain intact. Shipments of 230,056 bales were 5% higher than the previous week but 14% below the four-week average, suggesting logistical bottlenecks or slower order fulfillment.
El Niño Weather Outlook Strengthens
The U.S. Climate Prediction Center now estimates a 97% probability that El Niño will intensify through year-end and persist into early spring 2027. For key growing regions like Texas, El Niño typically brings increased rainfall and humidity, which can boost yields and reduce abandonment rates. If favorable weather materializes, the 2026/27 U.S. crop outlook could improve, applying downward pressure on forward prices. However, the growing season is still in a critical phase, and any sudden drought or extreme weather could reverse supply expectations.
Cross-Market Signals
CBOT corn, wheat, and soybean futures also fell as weather-driven gains faded. The U.S. dollar index declined, offering some support to dollar-denominated cotton, while the Nasdaq rallied on chipmaker strength, reflecting improved macro risk appetite. Traders are now awaiting the USDA's monthly World Agricultural Supply and Demand Estimates (WASDE) report, due early Saturday Beijing time, which will provide updated global cotton supply-demand balances.