At 80.53 cents per pound, the ICE cotton December contract settled on July 28, down 0.35 cents or 0.43% from the previous session. After last week's rally, the market is searching for direction, with traders weighing weather conditions and awaiting key export data.
Weather and Sowing: India's Expansion Adds Supply Pressure
The acceleration of monsoon rains is reshaping supply expectations for the Indian cotton market. As of July 28, India's cotton sowing area had exceeded 10 million hectares, with Telangana, Madhya Pradesh, and Andhra Pradesh all reporting increases year-on-year. Although the monsoon arrived about two weeks later than usual, industry insiders note that crop conditions are good, and the final sown area is expected to surpass last year's level. This implies a potential further rise in Indian cotton output for the 2026/27 season, exerting medium- to long-term pressure on global prices.
Meanwhile, weather conditions in major U.S. growing regions have been generally mild and favorable. Market participants in Chicago commented that core weather has been constructive for crops, but the market has partially priced this in, leading to profit-taking after last week's gains. Notably, ICE deliverable stocks fell to 90,699 bales from 94,235, indicating some tightening in physical supply, but this has not shifted the market's wait-and-see stance.
Macro and Substitution: Dual Pressure from Dollar and Oil
On the macro front, the U.S. dollar index stabilized near four-week highs as the market weighs the possibility of further Fed rate hikes. A stronger dollar directly undermines the purchasing power of overseas buyers for U.S. cotton, testing export demand. Meanwhile, international oil prices continued their decline, falling about 5% on July 28 to two-week lows. Lower oil prices reduce the production cost of polyester fiber, further eroding cotton's price competitiveness among textile raw materials. For fabric buyers relying on blended materials, this substitution effect warrants close attention.
Spot Market: Cotlook A Index Edges Up
While futures markets fluctuated, spot prices showed relative resilience. On July 28, the Cotlook A Index stood at 90.10 cents per pound, up 100 points from the previous day. The spread between spot and futures reflects upstream suppliers' willingness to hold prices, but whether downstream textile mills can accept this level depends on order recovery.