80.63 cents per pound—that was the closing price of the ICE cotton December contract on July 9, down just 0.04 cents or 0.05% from the previous session. Behind this seemingly calm figure lies a fierce tug-of-war among three forces: strong export data, profit-taking, and lower crude oil prices.
Background: Profit-Taking After Rally and External Pressures
On Tuesday, ICE cotton surged 3.8%, hitting its highest level since June 2, driven by speculative buying. However, the market saw capital outflows over the following two sessions. StoneX senior vice president Bailey McHenry attributed the decline to profit-taking by some speculators after the earlier rebound. He noted that the 40-day moving average provided solid technical support, allowing prices to recover part of the early losses.
Meanwhile, international crude oil prices fell about 2%, indirectly pressuring cotton. Lower oil prices reduce the production cost of polyester, a key substitute for cotton, potentially weakening cotton's relative competitiveness. This transmission mechanism has repeatedly appeared in recent price movements of textile raw materials and deserves close attention from buyers.
Industry Impact: Strong U.S. Export Data but Structural Concerns Remain
The USDA weekly export sales report for the week ending July 2 was robust, injecting confidence into the market. Current-crop upland cotton net sales reached 66,400 bales, up 36% from the previous week, including 3,294 bales sold to China. Next-crop net sales totaled 86,971 bales. Shipments for the week were 230,056 bales, up 5% week-over-week.
What do these numbers mean? From an industry perspective, global demand for U.S. cotton remains resilient, especially with strong forward sales for the next crop, indicating that overseas mills are locking in future supplies early. However, sales to China were relatively modest at just 3,294 bales, suggesting Chinese buyers remain cautious at current price levels and are not engaging in large-scale restocking.
Weather Variable: El Niño Strengthening, U.S. Yield Outlook Improves
The U.S. Climate Prediction Center confirmed that El Niño will intensify through late 2026 and persist into early spring 2027, with a 97% probability. For the key growing region of Texas, El Niño typically brings increased rainfall and humidity, which can boost cotton yields and reduce abandonment rates.
This weather signal is bullish for U.S. cotton production expectations. If Texas receives adequate moisture during the critical growing period, the 2026/27 abandonment rate could fall below recent averages, lifting total output. For the international market, this implies further supply loosening in the forward months, potentially capping far-term contract prices.
## Market Outlook: USDA Monthly Report Becomes Short-Term Focus
Traders are awaiting the USDA monthly supply-demand report, due out on July 11 Beijing time. This report will provide the first official estimates for 2026/27 global cotton production, consumption, and ending stocks, serving as a key calibration point for the annual balance sheet.
Given the strong export data, improving weather outlook, and volatile oil prices, the report's revisions to global ending stocks, U.S. production, and Chinese import demand will determine whether cotton can break out of the current 80-85 cents/lb range.