ICE cotton futures for December delivery fell 0.79% to 80.87 cents/lb on July 14, pressured by China's reserve cotton sales announcement. Profit-taking after last week's rally exacerbated the decline, but the market should focus on the supply-demand logic behind this policy.
Background
China National Cotton Reserves Corporation announced reserve sales starting July 20, with daily volumes adjusted flexibly. While widely anticipated, the confirmation triggered fund exits. StoneX noted that after last week's sharp gains, many longs locked profits on the news.
Meanwhile, USDA's July report raised 2026/27 US cotton production by 400,000 bales to 13.7 million bales, with global supply up 300,000 bales. Brazil's Conab estimated 2025/26 output at 4.0598 million tons, down 0.5% year-on-year, with planted area falling 3.2% to 2.0186 million hectares.
Industry Impact
Reserve sales benefit mills short-term by providing cheaper raw materials and easing inventory pressure. However, futures market reaction shows traders worry about a lower price floor. If sales volumes rise, spot prices will face direct pressure, especially substituting for Xinjiang and imported cotton.
Globally, higher US output offsets lower Brazil production, keeping supply loose. Demand uncertainties persist: China's downstream orders recover slowly, and Western restocking hasn't accelerated. ICE deliverable stocks fell to 121,285 bales, indicating weak physical delivery appetite and cautious sentiment.