On August 3, ICE cotton futures rose 0.95% to 82.57 cents/lb despite a more than 6% drop in oil prices. This contrast deserves attention across the textile supply chain: when crude oil plunges and drags down polyester costs, cotton prices refused to follow, holding gains amid profit-taking. On the surface, it is a battle of capital; underneath, it signals a tightening global cotton supply-demand balance. For buyers, this may mean the cotton-polyester spread will widen further, narrowing the window for fiber substitution.
Background
The market faced pressure from two factors: first, after last week's rally, speculative funds chose to lock in profits; second, the US postponed military action against Iran, sending Brent crude down about 7% to a three-week low. Lower oil prices directly reduce polyester production costs, theoretically weakening cotton's price competitiveness. Yet ICE data showed the December contract still closed higher, indicating buying interest outweighed selling pressure.
More telling was the positioning data. CFTC figures for the week ending July 28 showed speculators cut net long positions by 2,295 lots to 70,542, but positions remained elevated. StoneX risk consultant Bailey McHenry noted that fund traders still hold fairly heavy net longs, and the market retains a modest upward trend on a weekly basis. This suggests institutions have not changed their medium-term view despite short-term volatility.
Industry Impact
Strong export data underpinned cotton's resilience. USDA export sales for the week ending July 23 showed net sales of 352,400 bales for the next marketing year, a nearly 22-fold jump from the prior week's 16,100 bales. The surge was driven mainly by China, Vietnam, and other textile powerhouses, indicating mills are locking in supplies for autumn-winter orders. For domestic spinners, the pressure of rising US cotton costs is building.
Meanwhile, crop conditions are deteriorating. As of August 2, the US cotton condition rating fell to 42% good-to-excellent, down from 46% the previous week and well below 55% a year ago. Consecutive declines, coupled with robust export demand, have intensified concerns over 2026/27 US cotton output. ICE certified stocks also fell, to 87,606 bales on July 31, down 3,093 bales from the previous session, confirming a tight physical market.
Cotton's resilience also appeared in the cash market. The Cotlook A index on August 3 rose 280 points to 92.80 cents/lb, a 0.3% gain, outpacing futures. The synchronized rise in spot and futures indicates firm real demand rather than pure speculation. For textile mills, this means cost pass-through will be more direct, squeezing margins further.