Summary
Key Takeaways
ICE Dec ‘26 closed July 24 at 79.98 cents/lb, up 4.1% month to date despite Friday’s 1.23-cent selloff.
USDA raised 2026/27 U.S. production to 13.7 million bales and world production to 117.3 million. World stocks-to-use edged up to 58.4%.
Domestic origin data diverge from USDA. CASDE is lower on China output, while CONAB is higher on Brazil and CAI has no full 2026/27 India balance.
Fund positioning and macro volatility remain the main near-term drivers.
July 2026 Market Commentary
Macro
Oil remained the primary macro driver this month. Brent traded between $71.6 and $100.7, peaking late in the month at $100.69 on July 23 before closing at $88.37 on July 27. Meanwhile, the US dollar held firm near 101.5, continuing to act as a headwind for U.S. cotton exports.
June headline CPI eased to 3.5% and core CPI to 2.6%. Fed-funds futures still priced a 38.8% chance of a July hike and an 81.7% chance that rates would be above the current range by September. Tariffs also remain a risk to textile demand.
Positioning
CFTC data for July through the 21st showed open interest fall by 6,280 contracts to 448,035, a decline of 1.38%. Managed money increased its net long position by 14,103 contracts, or 36.06% to 53,209 contracts. Commercials increased their net short position to 128,908 contracts, a rise of 7,327 contracts (+6.03%).
Futures, Spreads, and Options
Dec ‘26 settled at 80.88 cents/lb on 27 July, up 5.31% from June 30. Oct ‘26 closed at 79.34 and Mar ‘27 at 82.47, leaving the front of the curve in carry.
Options Analytics
ATM IV is 71st-percentile, call skew 93rd and wings only 19th: steep, not uniformly rich.
Long-dated call skew is 96th–98th-percentile while butterfly is 7th–8th: asymmetry, not broad wing richness.
Dec ’26 option OI is 99.7th-percentile; the one-month draw is 0th-percentile: exceptional crowding is unwinding.
OI is 99.7th-percentile; 81C added 1,058 while 76C shed 2,641: rotation persists inside an extreme stock.
Futures Curve
Every contract rallied 2.46–4.25¢ over the month; May and July led on historical rank.
OI rotated out of Dec (−5,523) and into Mar–Jul, led by Mar (+9,607) and May (+7,742).
Near carry widened while the back end tightened: Z6/H7 fell 0.25¢ and N7/Z7 rose 1.77¢.
Managed money added 14,764 as producers sold 11,926; combined OI rose 22,772 to the 97th percentile.
Options-equivalent OI is 98th-percentile and 29.1% of combined OI; the latest weekly residual fell 4,432.
WASDE
U.S. 2026/27: USDA raised production to 13.7 million bales and ending stocks to 4.1 million. Stocks-to-use rose to 29.5%, while the farm price stayed at 73 cents/lb.
World 2026/27: USDA raised production to 117.3 million bales and consumption to 122.0 million. Ending stocks are 71.2 million, or 58.4% of use.
2025/26: USDA left the U.S. balance unchanged. World production fell 750,000 bales and ending stocks fell about 900,000, led by Brazil.
ABCUI (Australia, Brazil, China, U.S. and India)
Australia: ABARES, 2 June, forecasts 2026/27 lint output at 693,000 tonnes, down 32.8%, as area falls to 319,000 ha. Exports are forecast at 1.008 million tonnes, down 19.8%.
Brazil: CONAB, 14 July, forecasts the 2025/26 crop at 4.06 million tonnes of lint and exports at 3.38 million tonnes. Yields are up 2.8% despite a 3.2% area decline; IMEA puts the Mato Grosso harvest at 13.11% as of 24 July.
China: CASDE, 10 July, holds 2026/27 output at 6.34 million tonnes, consumption at 7.80 million and imports at 1.50 million. Ending stocks rose to 8.22 million tonnes; heat and tight water supply in Xinjiang are the main crop risk.
United States: USDA, 10 July, forecasts 2026/27 production at 13.7 million bales, exports at 12.3 million and ending stocks at 4.1 million. Brazil remains the larger exporter under USDA’s framework.
India: CAI, 26 May, estimates the 2025/26 crop at 334 lakh 170 kg bales, but the government committee’s 24 July estimate is lower at 290.91 lakh. CAI has no full 2026/27 balance; sowing reached 92.53 lakh ha by 17 July, down 6.0% year on year.
Agency Outlook
Agency estimates split by crop year: India leads the 2025/26 source set; China leads the 2026/27 outlook.
India’s official committee estimate is 3.36m USDA bales below CAI; Brazil offsets lower area with stronger yield.
China’s 6.71m-bale use gap is the clearest demand signal; Australia’s exports exceed new production.
World use exceeds production by 4.69m bales, but stocks still cover 58.4% of consumption.
Global Trade Pulse
Imports are accelerating faster than exports: MYTD imports are up 9.8%, versus 4.7% for exports.
Brazil and U.S. exports are running above seasonal norms; Pakistan is the standout import signal.
Brazil has taken the export lead, while China is the fastest-growing major import market.
The biggest rotations are Brazil→China (+1.45m bales) and U.S.→Vietnam (+1.00m); U.S.→Pakistan fell 0.94m.
Raw fibre trade is weaker, but yarn is holding up—demand is shifting further downstream.
Cash Prices
The Cotlook A Index reached 90.35 cents/lb on July 24, a 10.37-cent premium to Dec ‘26 futures. USDA’s Adjusted World Price fell to 63.82 cents/lb, while ICE certificated stocks were 94,235 bales.
USDA export data for the week ending July 16 showed sales of 51,287 running bales and shipments of 276,313, a four-week high. Total 2025/26 commitments reached 12.003 million RB, or 102% of USDA’s projection.
Near-Term Outlook
The balance sheet is bearish, however the market across U.S. ags are pricing in a tighter U.S. balance sheet in 26/27 while the global production and consumption continue to diverge.
U.S. cotton was 45% good-to-excellent on July 20, while Texas dryness and Xinjiang heat are putting pressure on the USDA’s view.
Watch the July 29 FOMC decision, Texas crop development, China reserve signals and the August 12 WASDE. Dec ‘26 needs to regain 82-84 cents; managed money’s 53,209-contract net long raises liquidation risk below that band.
