82.57 cents per pound. That was the settlement price for ICE cotton's December contract on August 3, up 0.95% from the previous session, yet the market spent most of the day under pressure. The tug-of-war between a sharp oil slump and robust export data defines the current market. For the textile supply chain, understanding this divergence matters more than tracking daily moves.
Data signals: three forces behind the move
On August 3, US crude futures fell more than 5%, while Brent crude plunged about 7% to a three-week low. The trigger was President Trump's decision to hold off on striking Iran again, seeking a deal that could increase Gulf oil supplies. Lower oil prices reduce the production cost of polyester—cotton's substitute—weighing on cotton prices. That was the core bearish logic during the session.
At the same time, the market absorbed profit-taking from last week's rally. StoneX risk management consultant Bailey McHenry noted that after a strong advance late last week, prices were naturally retreating from highs. Speculative positioning confirmed this: for the week ending July 28, managed money trimmed net longs by 2,295 contracts to 70,542, but the level remained elevated, suggesting funds are not fleeing.
More striking was the USDA export sales report. For the week ending July 23, net upland cotton sales for the next marketing year reached 352,400 bales, a nearly 22-fold jump from 16,100 bales the prior week. This contrasts sharply with the oil-driven decline, indicating overseas buyers are locking in supply on dips, and underlying demand is firmer than the board suggests.
Industry impact: inventory and crop conditions
Inventory data offer another lens. As of July 31, ICE deliverable cotton stocks fell to 87,606 bales from 90,699 a day earlier, reflecting smooth physical market absorption. Meanwhile, the US cotton crop condition rating dropped to 42% good-to-excellent, down from 46% the prior week and well below 55% a year ago. Deteriorating crop conditions could dent yields, providing latent support for deferred prices.
For textile mills, lower oil prices reduce polyester costs, which may divert some demand in the short term. But the substitution between cotton and polyester is not linear. With cotton hovering above 82 cents and polyester cheaper, the widening spread could prompt some blended yarn producers to adjust ratios. However, the surge in US export sales shows international buyers prioritize quality and supply stability over pure price comparison.
From a supply chain perspective, ICE movements affect import costs for domestic spinners. The falling dollar index and relative RMB appreciation partially offset the impact of higher dollar-denominated cotton. But if crop conditions continue to worsen, supply expectations could tighten, supporting deferred contracts. Spinners should hedge against potential cost increases.