ICE cotton futures traded around 80.90 cent/lb on July 22, up 2.76% month-over-month and 21.43% year-on-year, according to Trading Economics data. Gains were capped by the USDA's July WASDE, which projected larger crops in both Brazil and the United States alongside only modest consumption growth. Prices pulled back from a one-month high of 81.2 cent/lb as a stronger US dollar affected risk appetite.
The USDA July WASDE delivered a mildly bearish surprise. US 2026/27 production was raised to 13.70 million bales, above the average trade expectation of 13.42 million and up from 13.30 million in June. Planted area was raised to 9.85 million acres, with abandonment at 23.5% basically unchanged from June. Yield was raised to 872 lb/acre from 866, despite dry conditions in Texas.
US ending stocks for 2026/27 came in at 4.10 million bales versus 3.77 million expected and 3.70 million in June, a more comfortable balance than the trade anticipated. 'Some may have expected USDA to reduce yield because of the dry conditions in Texas, but that did not happen,' noted ADM Investor Services.
Brazil is the other major supply-side story. Brazilian cotton exports to Asia are booming, with exports up 10.6% year-on-year. Larger Brazilian crops and aggressive export pricing into Asia are capping ICE rallies. The competition from Brazil is structural: expanding acreage, improving yields, and favorable exchange rates have turned Brazil into a consistent top-3 global exporter.
India's delayed planting is the most significant bullish undercurrent. India experienced one of its driest Junes since 1901, with rainfall about 11% below normal. Cotton planting has been delayed across Maharashtra, Gujarat, and Telangana. The delayed sowing pushes the harvest window later and exposes the crop to potential damage from late-season pests or early monsoon withdrawal.
US crop conditions underscore the weather uncertainty. The USDA rated 44% of the US cotton crop as good-to-excellent as of mid-July, down from 48% the previous week and 52% a year ago. Another 40% was rated fair. Texas A&M Cotton Marketing Notes highlighted the key question: whether the crop receives timely rains in July, August, and early September.
The Texas weather picture is mixed. Flooding rains from a tropical system provided moisture in mid-July, but parts of the Southeast remain hot and dry. The drought monitor has been slowly improving but conditions vary widely by region. The Price Group's July 20 report noted weak export sales despite the supportive fundamentals.
Technically, the market is in a consolidation phase. Support is identified at 79.30, 77.10, and 75.50 cent/lb for December, with resistance at 84.20, 86.20, and 88.10 cent/lb. The mixed-to-down trend suggests the market is waiting for a catalyst either a weather-driven supply shock or a demand disappointment before establishing a new directional move.
Cotton buyers face a two-sided market: large US/Brazil crops capping rallies, but global weather risks preventing a breakdown. At 80-81 cent/lb, the midpoint of the December contract's support/resistance range (77-84 cent), the risk-reward is roughly balanced. For textile mills and apparel buyers, the correct approach is to scale into coverage on dips toward support. Layer 25% of 12-month needs at current levels (80-81 cent), another 25% if December falls to 77-78 cent, and maintain flexibility on the remaining 50% with options. The India delayed planting story has not fully materialized in pricing. If the monsoon remains weak through August, expect 2-4 cent of weather premium to return. Origin diversification matters: Brazilian cotton quotes are competitive with US Gulf for Asian delivery, with exports to China and Vietnam surging. For US mills, the domestic market (A Index) trades at a discount to ICE, reflecting weak local demand. Consider using a put spread collar (buy 77 put, sell 84 call) to protect against both a weather-driven rally and a demand-driven selloff while keeping premium costs manageable. The August WASDE and USDA August Crop Production report will be the next major catalysts. If the US yield is cut from 872 lb/acre on Texas dryness, the production estimate drops by 500,000 bales and the balance sheet tightens meaningfully.