1.Price Trends and Recent Movements
ICE Futures Volatility:
ICE cotton futures fluctuated sharply in early July. On July 2, ICE December cotton rose 0.9% to 68.63 cents/lb, driven by higher grain and oil prices (crude surged 3% after U.S.-Vietnam trade deals). However, by July 7, December contracts fell 0.83% to 67.89 cents/lb—a two-week low—due to improved U.S. crop weather and renewed tariff tensions.
Key Drivers: Weather risks (e.g., Texas droughts vs. Midwest rains), dollar volatility, and crude oil prices impacting polyester costs.
Regional Spot Markets:
China’s 3128B grade cotton traded at 15,165 RMB/ton (↓0.2% WoW), while U.S. M1-1/8 cotton landed at 13,713 RMB/ton. The price gap narrowed to 1,452 RMB/ton due to weak Chinese demand.
Cotlook A Index averaged 78.85 cents/lb, reflecting global caution.
2.Supply-Demand Fundamentals
Global Balance Sheet:
The USDA June report projects 2025/26 global cotton stocks at 16.72 million tons (↓1.1 million tons YoY), with a stocks-to-use ratio of 65.22%. Production declines in India (-64K tons) and the U.S. offset China’s output growth (expected at 6.86 million tons, ↑2.8% YoY).
Demand Weakness:
Export Slump: U.S. 2024/25 cotton export sales fell 56% YoY, with Southeast Asian buyers (Vietnam, Bangladesh) delaying contracts amid tariff uncertainty.
China’s Struggles: Textile exports grew only 1% YoY (Jan-May 2025), while domestic yarn inventories hit 22.34 days—pressuring mills to reduce cotton blending ratios.
3.Geopolitical and Policy Risks
U.S. “Reciprocal Tariffs” Deadline (July 9):
Failure to reach agreements could trigger new tariffs (10–70%) on trade partners, disrupting exports. Vietnam’s deal with the U.S. (20% tariffs on textiles) signals stricter rules to curb transshipments of Chinese goods.
Impact: Chinese importers shifted from U.S. cotton to Brazilian (57% share) and Indian sources, slashing U.S. market share to 20%—a 10-year low.
India’s MSP Hike:
India raised cotton MSP by 8.27%, boosting planting area to 3.125 million hectares. Monsoon rains (22% above normal) may elevate 2025/26 output.
4.Country-Specific Dynamics
| Country | Key Developments |
| USA | Acreage ↓9.5% YoY, but yields may rebound with improved crop conditions (52% good/excellent rating). |
| Brazil | Exports fell 16% YoY (May 2025); high production costs and competition with Australian cotton eroded price competitiveness. |
| India | Imports ↑ to 650K tons due to domestic supply gaps; export focus shifted to non-U.S. markets. |
| China | Xinjiang output dominates (85% of national production); industrial inventories at 312.7K tons (↓4.6% WoW). |
5.Short-Term Outlook (Q3 2025)
- Price Range: ICE cotton likely to trade between 65–80 cents/lb, constrained by:
- Weak global demand and high inventories.
- Weather disruptions (e.g., Xinjiang heatwaves, Texas droughts).
- Critical Watchpoints:
contracts.
Crude oil trends: Sustained highs would lift polyester costs, indirectly supporting cotton.
Monsoon/heat impacts in India/China: Yield revisions may alter supply forecasts.
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