ICE cotton futures fell for a second straight session on July 9, with the December contract settling at 80.63 cents per pound, down 0.04 cents. Despite a strong weekly export sales report from the USDA, profit-taking dominated after Monday's 3.8% rally. StoneX senior vice president noted speculative funds locking in gains, causing a mild outflow. Lower crude oil prices—down about 2%—also pressured cotton by reducing polyester costs, cotton's key synthetic substitute.
On the export front, U.S. upland cotton net sales for the current season reached 66,400 bales, up 36% week-over-week, including 3,294 bales to China. Next-season sales added 86,971 bales. Shipments totaled 230,056 bales, up 5% from the prior week but 14% below the four-week average. While the data is fundamentally supportive, the market focused more on supply expectations: the U.S. Climate Prediction Center confirmed a 97% probability that El Niño will strengthen by year-end and persist into early spring 2027. For Texas and other key growing regions, this implies more rainfall, potentially boosting yields and lowering abandonment rates—a bearish signal for forward prices.
Short-Term Bull-Bear Battle
The market remains in a typical tug-of-war. On the bullish side: improving U.S. export sales, a weaker U.S. dollar index, and a pullback in Chicago grains ahead of the monthly WASDE report all provide support. Technically, the 40-day moving average has triggered a bounce, helping recover some earlier losses. On the bearish side: lingering profit-taking sentiment and lower oil prices undermining polyester's cost advantage. Traders are also awaiting the USDA's monthly supply-demand report due Saturday midnight Beijing time, which could further adjust production and inventory estimates.
For the supply chain, the 80-cent level has become a critical psychological threshold. If it holds, mills can consider hedging; a break below could trigger stop-loss selling. Notably, El Niño's impact on U.S. yields is lagged, but its near-term effect works through market sentiment rather than physical supply changes.
Industry Impact: Sourcing Decisions Under Pressure
For Chinese cotton textile enterprises, current price volatility complicates raw material procurement. On one hand, the Cotlook A Index fell 50 points to 89.75 cents/lb, easing imported cotton costs. On the other, yuan exchange rate fluctuations and rising freight costs add extra risk. Downstream weaving and garment orders show no clear recovery, so mills prefer low inventory and hand-to-mouth buying.
In Xinjiang, the key domestic growing region, El Niño's climate uncertainty also deserves attention. If U.S. yields rise, the global supply surplus narrative will strengthen, potentially eroding the competitiveness of Xinjiang cotton. Overall, cotton prices are expected to oscillate in a wide range through Q3, with a directional breakout awaiting either demand recovery or a weather-driven supply shock.