On August 6, ICE cotton futures for December settled 0.17% higher at 83.16 cents per pound. The modest gain reflects a convergence of US export sales data and weather risks. For the textile industry, understanding the supply-demand signals behind these numbers is more important than tracking daily price moves.
Export Data: Divergence Between Old and New Crop
According to the USDA export sales report for the week ending July 30, current-year US upland cotton net sales were down 55,858 bales, a sharp 288% decline from the previous week. However, next-year net sales surged to 242,052 bales, with zero sales to China. Shipments totaled 222,830 bales, down 5% week-over-week. This data reveals a key signal: weak old-crop demand but robust new-crop bookings.
Industry insiders note that the old-crop reduction mainly stems from order cancellations, while the new-crop surge reflects concerns about future supply. Brazil's July cotton exports reached approximately 154,966 tonnes, up 22% year-over-year, indicating a shift in global trade flows toward the new season.
Weather Risks: Potential Impact of El Niño
Weather is another focal point. The US Southern Plains remain hot and dry, with cotton fields from Texas to Kansas heavily dependent on rainfall, making yields vulnerable to drought. The USDA daily weather report shows persistent heat in the Southern Plains and a return of high temperatures in the Northern Plains, with only scattered showers in Kansas.
More concerning is the forecast of a strong El Niño this year, which could significantly alter rainfall patterns. India's monsoon has already been delayed, with July rainfall expected to be below average. This implies that weather risks are accumulating across major Northern Hemisphere cotton producers, and any yield damage could tighten global supply and push prices higher.
Industry Impact: Price Expectations and Procurement Strategy
For textile mills, the modest ICE gain is not an isolated event. Strong new-crop bookings, coupled with a weather premium, suggest the market is pricing in supply risks for the next season. The Cotlook A index rose 50 points to 93.50 cents per pound, confirming a firm cash market.
In the near term, cotton prices may remain firm. However, if the El Niño impact proves milder than expected, the weather premium could quickly evaporate. Therefore, buyers should avoid chasing highs and instead lock in forward volumes based on their order cycles.