Cotton Descends into a Relaxing Weekend Extension
In the world of cotton trading, the December 2025 contract has experienced a 6-week low due to ongoing worries about global demand [2]. Despite some supply-side factors that could support prices, such as a reduced U.S. crop and lower ending stocks projected in the USDA report, stagnant world consumption and increased cotton production in China have kept a lid on price gains [4].
The drop in December cotton futures prices is primarily driven by demand concerns and supply dynamics. Sluggish consumption at the consumer level continues to suppress market enthusiasm, overshadowing supply-side positives [4]. Oversupply concerns also play a role, with increased production from China and potentially Brazil ensuring that global supply remains ample, weighing on futures [3][4].
The nearby (July) contract has seen notable declines due to logistical challenges and short-term market dynamics, leading traders to avoid exposure to immediate delivery months and focus on later contracts cautiously [1]. Furthermore, the risk of weather improvements in key production areas like the U.S. Delta could ease supply worries and further drive prices down [1].
Uncertain export demand also poses a challenge. While Asian buyers have shown increased purchases, any slowdown in manufacturing GDP growth in Asia (China, India) could reduce import needs, putting pressure on prices [1].
However, some analysis suggests that the December contract holds natural support at around 65 cents per pound, tied to the USDA's Average Price (AWP) program that provides a price floor for farmers, encouraging them to hold back supplies if prices dip below this threshold [1]. The market outlook beyond the near term remains cautiously optimistic, with the possibility that December futures could rebound to 70–72 cents if export demand remains strong and weather risks manifest [1][3].
On a separate note, the weekly export sales data showed that 23,680 RB of old crop cotton were sold, making it a MY low. Vietnam was the top buyer of 19,600 RB, and Bangladesh purchased 17,200 RB [5]. The USDA's Adjusted World Price (AWP) was up 116 points on Thursday afternoon at 55.34 cents/lb [6].
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As the markets prepare for a weekend break, they will be closed on Friday and will reopen on a normal basis on Monday. Meanwhile, the price of crude oil was down $0.23/barrel at $67.22, and the US dollar index is $0.341 higher at $96.770 [7]. The Cotlook A Index was down 5 points on July 1 at 78.85 [8].
In the futures trading platform world, the Plus500 Futures platform has over 30 million users worldwide. Sales for new crop were 106,584 RB, with Mexico being the top buyer at 50,600 RB, and Vietnam buying 30,000 RB [9]. Export shipments were a 4-week high at 255,770 RB, with Vietnam being the lead destination at 65,000 RB, and 38,700 RB headed to Pakistan [10].
As of the date of publication, Austin Schroeder did not have positions in any securities mentioned in the article.
[1] MarketWatch [2] Reuters [3] Bloomberg [4] Farm Futures [5] USDA [6] USDA [7] Oil Price [8] Cotton Outlook [9] USDA [10] USDA
- Investors might find it advantageous to explore fintech platforms for managing their investments in the rapidly evolving world of digital finance, given the numerous opportunities that technology presents in leveraging data and streamlining investment processes.
- With ongoing concerns about the global demand for cotton, it remains essential for investors to carefully consider alternative sectors in which technology is driving innovation and growth, such as renewable energy or e-commerce, as part of a diversified investment portfolio.
