ICE cotton futures for December delivery fell 0.64 cents to 80.87 cents per pound on July 14, a 0.79% decline. The drop came as two bearish factors converged: China's reserve cotton sales announcement and an upward revision of US production estimates. Profit-taking by speculative funds erased gains from the previous week.
Reserve Sales: Profit-Taking After Expected News
China National Cotton Reserves Corporation announced on July 14 that it would begin selling central reserve cotton from July 20, with daily volumes adjusted based on market conditions. The move had been widely anticipated since late June, when industry sources predicted a July launch to ease mill supply shortages. After the announcement, speculative funds that had driven prices higher last week quickly exited, creating concentrated selling pressure on ICE. A StoneX broker noted the market exhibited a classic 'buy the rumor, sell the fact' pattern.
For Chinese textile mills, reserve sales mean access to relatively stable-priced domestic cotton in the short term, reducing reliance on imports. However, details such as the floor price and daily offering volume remain undisclosed. If the pricing is too low, it could further depress spot market quotes.
US Production Increase and Global Supply
The USDA's July supply-demand report raised the 2026/27 US cotton production forecast by 400,000 bales to 13.7 million bales, driven by expanded acreage and favorable weather in key growing regions. Global supply was revised up by 300,000 bales, reinforcing the expectation of ample availability this season.
Brazil's Conab reported 2025/26 output at 4.0598 million tonnes, down 0.5% year-on-year, with planted area shrinking 3.2% to 2.0186 million hectares. Higher yields largely offset the acreage decline, so global supply remains loose.
Cross-Market and Sentiment Factors
Cotton's decline was not isolated. CBOT soybean futures fell on improved crop ratings and reduced weather threats, while corn also edged lower. The broader agricultural complex showed weak sentiment, with funds pulling back from long positions. A weaker US dollar and oil's 2% rise failed to support cotton, indicating that supply-demand fundamentals dominate.
ICE deliverable stocks fell to 121,285 bales from 127,127 bales, easing delivery pressure but not enough to reverse the bearish trend.
Short-Term Outlook and Industry Impact
The 80-cent level is a key psychological support for the December contract. If Chinese spot prices continue to fall after reserve sales begin, ICE may test below 80 cents. However, Brazil's slight output drop, US weather uncertainty, and Chinese mills' demand for high-quality foreign cotton should provide a floor.
For domestic mills, the reserve sales window offers a chance to lower raw material costs, but they should watch for a potential rebound after sales end. Exporters should monitor currency fluctuations and rising freight costs from higher oil prices.