ICE cotton futures settled at 81.54 cents per pound on July 10, up 1.13% for the session and 5.7% for the week. The price reflects a tug-of-war between a bearish USDA July supply-demand report and growing weather concerns in key producing regions. For textile mills, this volatility reshapes procurement timing.
Bearish supply-demand report, largely priced in
The USDA July report raised 2026/27 US cotton production estimates to 13.7 million bales from 13.3 million in June, and ending stocks to 4.1 million bales from 3.7 million. Global supply was also lifted by 300,000 bales. The report initially dragged futures lower, but the decline was short-lived.
The market had already anticipated higher US output due to expanded acreage, and the inventory build was consistent with expectations of rebalancing. The dip was a sentiment flush rather than a trend reversal. The real driver of the rebound came from weather.
Weather premium takes center stage
Erratic monsoon rains in India and a dry 10-day forecast for West Texas sparked concerns over potential yield losses. Although the USDA July report did not adjust yields, historical patterns show that drought during critical growth phases directly reduces final output.
West Texas, which accounts for over 40% of US cotton production, is the focal point. If dryness persists, the August USDA report may cut yield estimates. The December contract holding above 81 cents is an early pricing of this risk.
Cross-market support amplifies volatility
Strength in the grains complex added a tailwind. On July 10, CBOT corn, soybeans, and soyoil all rose; European wheat futures gained over 2%, and US soft red winter wheat hit a six-week high, partly on renewed geopolitical tensions related to the Russia-Ukraine conflict.
The US dollar index edged up, theoretically a headwind for dollar-denominated cotton, but weather anxiety outweighed currency effects. The S&P 500 near its record high signaled ample macro liquidity, supportive for commodities broadly.
Spot market steady, futures-spread awaits normalization
The Cotlook A Index stood at 89.75 cents/lb on July 10, unchanged. The spread between the ICE front-month and the A Index is about 8 cents, moderately wide by historical standards, indicating that futures carry more weather premium while spot remains cautious.
For buyers, the high volatility complicates cost locking. If weather improves in August, the premium may quickly unwind; if drought persists, 80 cents becomes the new floor.