U.S. cotton cash prices rose 99 points week-on-week to 73.97 cents/lb in the week ending July 16, marking a 14.7% year-on-year increase. However, spot trading volume plunged to just 604 bales, only 17% of last year's level, signaling a divergence between price and activity that warrants attention.
Price Transmission: Tug-of-War Between Upstream Hikes and Downstream Caution
The average cash price of 73.97 cents/lb sits near a three-month high. The intra-week range of 72.37 to 74.95 cents/lb, a spread of 2.58 cents, reflects deepening market divergence. ICE December futures fell 2.25 cents on Thursday to close at 79.30 cents/lb, with the futures-cash spread suggesting market expectations of looser supply ahead.
Cumulative spot volume for the current marketing year (since August 1) reached 1.523 million bales, up 54% from 987,565 bales a year earlier. But the recent plunge in weekly volume indicates that earlier gains were driven more by trade restocking than end-use consumption. Mills are inquiring for October-December delivery cotton with color grade 42+, leaf grade 4+, and fiber length 35+, but no actual trades have occurred. Downstream demand remains slow to moderate, keeping mills cautious in raw cotton procurement.
Regional Divergence: Drought Relief in the Southeast, Insect Pressure in the Southwest
The Southeast (Georgia, Alabama) received 0.5-2 inches of rain, with local amounts up to 3 inches, easing previous drought. Georgia's squaring rate reached 78%, Alabama 76%; boll setting rates are 34% and 20% respectively. Overall crop conditions are mostly rated "good." Insect pressure is light to moderate, with some fields requiring growth regulator applications.
Texas faces a more complex picture. South and East Texas saw 0.75-2.5 inches of rain from thunderstorms, but stinkbug populations are large, causing boll damage in the Coastal Bend region. The Upper Coast is seeing bolls opening, while the Lower Rio Grande Valley has begun defoliation, with harvest expected within two weeks.
In West Texas, Kansas, and Oklahoma, below-normal temperatures (daytime highs 27-37°C, nighttime lows 15-26°C) hinder moisture accumulation for dryland cotton. Irrigated fields are faring well, but dryland areas urgently need more rain. Kansas growers are battling fleahoppers and lygus bugs with increasingly complex spray programs. Oklahoma has reported square shedding, and fields are entering peak water demand.
Demand: Domestic Caution and Export Divergence
Domestic mill inquiry is light, limited to specific quality for forward contracts, with no actual trades. CCC loan collateral cotton trading is also light, indicating no desire to build inventories across the supply chain.
Export demand is moderate but structurally divided. Far East agents are primarily inquiring for discounted varieties, showing high price sensitivity. Interest is relatively highest from Korea, Pakistan, and Peru, but overall inquiry is limited. This suggests limited premium for high-grade cotton and potentially intense price competition for lower grades.