80.63 cents per pound—that was the settlement price for the ICE cotton December contract on July 9, down just 0.05% from the previous day, but marking a second consecutive session of losses. After Tuesday's rally to the highest level since June 2, the market is undergoing a round of profit-taking, while weaker crude oil prices have further eroded the support base for cotton.
Profit-Taking and External Market Resonance
StoneX senior vice president Bailey McHenry noted that speculative funds chose to lock in gains after the recent rebound, leading to a small capital outflow on the day. However, he also emphasized that the 40-day moving average on the technical chart provided strong support, with prices bouncing from that level to recover some of the earlier losses.
More noteworthy is the indirect pressure from falling oil prices. Crude oil dropped about 2% on the day, reducing the production cost of polyester fiber, a substitute for cotton, which somewhat weakens cotton's competitiveness among textile raw materials. For buyers relying on substitution elasticity between cotton and synthetics, this signal suggests limited upside potential for cotton prices.
Strong US Export Data but No Sentiment Shift
The USDA weekly export sales report for the week ending July 2 showed net sales of 66,400 bales of upland cotton for the current marketing year, up 36% from the previous week, including 3,294 bales sold to China. Net sales for the next marketing year reached 86,971 bales, while shipments totaled 230,056 bales, up 5% from the prior week.
The data indicate robust export demand for US cotton, especially with active advance sales for the new crop year. However, the market failed to gain sustained upward momentum, suggesting that current trading focus is more on short-term capital flows and external macro factors. For Chinese buyers, the landed cost of US cotton may remain volatile in the near term, and chasing rallies is not advisable.
El Niño: A Key Variable for US Cotton Yields
The US Climate Prediction Center's latest assessment shows a 97% probability that El Niño will strengthen further by year-end and persist into early spring 2027. For key growing regions such as Texas, El Niño typically brings more precipitation and humidity, which can boost yields and reduce abandonment rates.
If weather conditions improve as expected, US cotton production for the 2026/27 season could exceed previous forecasts, putting downward pressure on forward prices. However, the intensity and distribution of El Niño remain uncertain, and actual precipitation in producing areas needs continuous monitoring. For traders focusing on deferred contracts, this weather factor will be a non-ignorable variable in pricing models.
Related Markets and Report Expectations
Chicago Board of Trade corn, wheat, and soybean futures fell for a second straight session on Thursday, as a weather-driven rally faded after reaching one-month highs. The pullback in grain markets reflects the digestion of weather premiums, indirectly easing competitive land pressure on cotton.
Traders are awaiting the USDA monthly supply-demand report, due at 00:00 Beijing time on Saturday. The report will provide updated estimates for global cotton production, consumption, and stocks for the 2026/27 season, serving as a key guide for short-term price direction. A bearish report could trigger a new round of selling, while a neutral or bullish outlook may support prices stabilizing around 80 cents.