US cotton spot prices continued to rise in the week ending July 16, but a sharp drop in volume reveals deeper structural contradictions. USDA data showed the average spot price for base quality cotton across seven designated markets rose 99 points week-over-week to 73.97 cents/lb, up nearly 15% from 64.50 cents/lb a year earlier. However, spot volume for the week was just 604 bales, down 65% from 1,732 bales the prior week and 83% from 3,582 bales a year ago.
The divergence between price and volume is not a simple seasonal fluctuation. It suggests that upstream price gains lack support from actual downstream purchasing. Mill buyers inquired about cotton for October-December 2026 delivery but no trades were reported. Downstream finished product demand was described as 'slow to moderate,' with mills remaining cautious in balancing raw cotton purchases with order books. This wait-and-see sentiment extends to export channels, where Far East agents are only interested in discounted grades.
Regional Weather Divergence and New Crop Progress
The US Southeast received widespread rainfall, with Georgia and Alabama cotton squaring rates reaching 78% and 76% respectively, and boll setting ahead of normal. But conditions are more mixed in the Southwest. East Texas-South Texas saw 0.75 to 2.5+ inches of rain from thunderstorms, with Brazos River bottomland cotton growing well but stink bug populations heavy, causing some boll damage. The Coastal Bend reported boll injury, the Upper Coast saw bolls opening, and the Lower Rio Grande Valley began defoliation.
West Texas-Kansas-Oklahoma faces a split between dryland fields needing moisture and irrigated fields doing well. Most dryland cotton urgently needs rain, with some fields already showing square shed. Irrigated cotton is entering peak water demand. Kansas and Oklahoma farmers are irrigating and managing pests, but forecasts show low probability of additional rainfall.
Price Rally Faces Headwinds
ICE December cotton futures fell 2.25 cents or 2.76% on Thursday, settling at 79.30 cents/lb. The futures pullback resonates with thin spot trading. Spot prices are up nearly 15% year-on-year, but volume is at a seasonal low—such divergence is unsustainable. Season-to-date spot volume stands at 1,522,630 bales, above 987,565 bales last year, but the recent plunge signals buyers retreating as prices rise.
Fundamentally, the July 13 NASS crop report shows Georgia boll setting at 20% and Alabama at 34%, with new crop supply approaching. If no extreme weather hits in coming weeks, new crop supply will gradually pressure spot and futures. Meanwhile, downstream mill inventory digestion remains slow, limiting near-term buying appetite.