83.16 cents per pound—that was the settlement price for the ICE cotton December contract on August 6, up a mere 0.17% from the previous day. On the surface, it seems calm, but beneath lies a tug-of-war between export data and weather risks. For the textile supply chain, this price level is neither high nor low, yet it sits at a critical juncture that could determine the next direction.
Market Background
The US cotton export sales report showed a clear divergence. For the week ending July 30, current-crop upland cotton net sales fell by 55,855 bales, a sharp 288% drop from the prior week; while next-crop net sales increased by 242,052 bales, with zero sales to China. The contrast between weak old-crop sales and active new-crop bookings reveals concerns about slow old-crop inventory digestion and expectations of a tighter new-crop supply.
Brazil's export data added another signal. In July, Brazil exported 154,965.56 tons of cotton, a 22% year-on-year increase, indicating that South American supply is accelerating into the global market. Meanwhile, ICE deliverable stocks remained flat at 84,632 bales, showing no significant accumulation and suggesting that spot-side pressure is manageable for now.
Jon Marcus, president of Chicago-based Lakefront Futures and Options, captured the prevailing sentiment: export sales data are "decent," and there is nothing to suppress the market. He sees the beginning of a fairly bullish run. This view is underpinned by the assessment that weather risks could further tighten supply.
Industry Impact
Weather has become the most critical variable for cotton prices. In the US Southern Plains—from Texas to Oklahoma and Kansas—cotton yields are highly dependent on rainfall and soil moisture. The USDA daily weather report shows persistent hot and dry conditions in the Southern Plains, with high temperatures returning to the Northern Plains, while Kansas sees only scattered showers, still insufficient overall.
More alarmingly, a particularly strong El Niño is expected this year, which could significantly alter rainfall patterns. The Indian monsoon has already been delayed, with rainfall expected to be below average this month. For Indian cotton regions that rely on the monsoon, this could damage both planted area and yields, further affecting global supply dynamics.
For textile mills, this means procurement strategies need to be more flexible. Current cotton prices already include some weather premium, but if drought persists or El Niño impacts exceed expectations, prices could rise further. Conversely, if weather improves or demand remains weak, there is also downside risk.
From the demand side, old-crop net sales fell by 55,855 bales, with only 4,136 bales sold to China, and zero new-crop sales to China. This set of numbers warrants attention. As the world's largest cotton importer, Chinese buyers' absence puts substantial pressure on US cotton exports and reflects cautious sentiment in end-user orders.