RECENT PRICE MOVEMENT

Chinese and Indian prices moved slightly higher while other markets were flat over the past month.

• Although the most actively traded December NY/ICE contract floated towards the higher end of its relatively tight range between 67 and 70 cents/lb, it was not able to sustain the move, and the pattern in price movement remains sideways.  The latest value is near 67 cents/lb.
• The A Index also moved within a tight range, drifting between 77 and 80 cents/lb.  The current value is near 78 cents/lb.
• The Chinese Cotton Index (CC Index 3128B) increased slightly in international terms, rising from 92 to 97 cents/lb over the past month.  This extended the slow upward trend that has been in place since May, when values set lows around 88 cents/lb.  In domestic terms, prices rose from 14,600 to 15,100 RMB/ton over the past month.  In May, domestic prices set lows around 14,100 RMB/ton.  The RMB was stable near 7.17 RMB/USD over the past month.
• Indian spot prices (Shankar-6 quality) shifted slightly higher, breaking above recent highs set in May (82 cents/lb or 54,700 INR/candy).  Current levels are near 84 cents/lb or 56,000 INR/candy, about one month ago values were closer to 80 cents/lb or 54,000 INR/candy.  The INR was stable near 86 INR/USD.
• Pakistani spot prices held around 70 cents/lb over the past month.  In domestic terms, values traded around 16,500 PKR/maund.  The PKR was steady around 283 PKR/USD.

SUPPLY, DEMAND, & tRADE

Updates to USDA forecasts for 2025/26 included a +1.4 million bale addition to global production (to 118.4 million) and a +365,000 bale addition to global mill-use (to 118.1 million).  Revisions to previous crop years lowered 2025/26 beginning stocks -510,000 bales (to 76.8 million).  The net effect on the forecast for 2025/26 ending stocks was a +520,000 bale increase (to 77.3 million).  This volume represents the largest amount of stocks outside of 2019/20 (COVID) and the period when China was holding massive inventory in its reserve system (2012/13-2015/16).

At the country-level, the largest changes to 2025/26 production figures were for China (+1.0 million bales, to 31.0 million), the U.S. (+600,000 bales to 14.6 million), Pakistan (-200,000 bales to 5.0 million), and Mexico (+100,000 bales to 800,000).  For mill-use, the largest revisions were for Pakistan (+300,000 bales to 10.9 million) and Mexico (+100,000 bales to 1.4 million).

The global trade estimate for 2025/26 was mostly unchanged (-135,000 bales to 44.7 million).  In terms of imports, the largest changes for 2025/26 were for Pakistan (+600,000 bales to 5.9 million) and China (-700,000 bales to 5.8 million).  2024/25 import estimates were lifted for Pakistan (+300,000 bales to 6.1 million) and lowered for China (-300,000 bales to 5.2 million).  In terms of exports, there were no revisions of 100,000 bales or more. A notable change to 2024/25 export numbers was for the U.S. (+300,000 bales to 11.8 million).

PRICE OUTLOOK

Another series of significant developments hit markets over the past month.  Chief among these was the passing of the July 9th deadline the U.S. administration had set for negotiations with most trade partners (the deadline for negotiations with China is set for August 12th).  Framework tariff increases were released for a range of U.S. trade partners.  Many of the increases outlined were close to the levels proposed on April 2nd.  Although tariff increases were initially threatened to go into effect on the July 9th deadline, the application of the current round of duty increases was postponed until August 1st.  In the meantime, talks are scheduled to continue and tariff rates can be expected to continue to evolve. 

Despite the string of influential announcements in the policy environment, there was little reaction in the cotton market, with the December NY/ICE contract holding within its three cent/lb range between 67 and 70 cents/lb. 

There were also cotton-market-specific developments over the past month.  At the end of June, the USDA released an update to its estimate for U.S. planted acreage.  Given prices for cotton relative to other crops, and weather-related challenges that may have prevented planting in eastern regions, there were widespread expectations that the June number would have been meaningfully lower than existing figure.  However, the June estimate was adjusted slightly higher (from 9.9 to 10.1 million acres).  In recent years, there have been important revisions to acreage estimates after June (e.g., -500,000 acres Jul-Aug in 2024, -860,000 acres Aug-Sep in 2023, and +1.3 million acres Aug-Sep in 2022), so some uncertainty remains about U.S. acres planted.  There has been beneficial moisture in the southwest growing region, and the possibility of a better crop in West Texas contributed to the increase to the forecast for the U.S.

These cotton-specific developments also had little perceivable effect on cotton prices, with NY/ICE December futures generally holding within its tight three cent range since May.

Given the absence of price movement after all these events, there are questions about what could shake cotton prices out of their recent range.  There are downside pressures from a slowing global economy and the potential for further increases in global exportable supply looking for buyers.  Several of the countries that have the highest threatened tariff rates are also some of largest suppliers of apparel and textiles to the U.S.  If tariff rates are increased as much as has been threatened, there could be a chilling effect on downstream orders in the supply chain.  On the supply side, if moisture levels can hold up in West Texas during the critical period from late July and through August, there could be an additional couple million bales of exportable production. 

A factor that could inhibit price decreases could be the near record net short position held already by speculators in the futures market (Commodity Futures and Trading Commission or CFTC data).  Since speculators have been so negative on the market, their ability to go even shorter may be limited.  Relatedly, a potential factor that could support price gains could be a shift in speculator holdings away from their strong short position.  However, speculators likely would need a reason to change their position.  Policy uncertainty and projections of slower economic growth keep them from changing their position.

Disclaimer: The information contained herein is derived from public and private subscriber news sources believed to be reliable; however, Cotton Incorporated cannot guarantee its accuracy or completeness. No responsibility is assumed for the use of this information and no express or implied warranties or guarantees are made. The information contained herein should not be relied upon for the purpose of making investment decisions. This communication is not intended to forecast or predict future prices or events.