ICE Cotton Futures Reversed Early Gains And Closed Lower

The signs of easing trade tensions last week brought rare optimism. Next week, the US Department of Agriculture will release the official report of the 2025/26 crop year for the first time. As the uncertainty of demand is still looming, where will the market go?

On May 9 (Friday), the Intercontinental Exchange (ICE) cotton futures reversed its early gains and closed down. Investors waited for the monthly supply and demand report released by the USDA early next week.

ICE July cotton contract fell 0.08 cents, and the settlement price was 66.61 cents/lb. This week, the contract fell 1.8 cents or 2.63%.

The USDA crop growth report shows that 25% of Texas cotton has been planted, slightly higher than the five-year average. South Texas is making good progress driven by some recent precipitation, but as crops grow, they will need more water.

Recent rainfall in West Texas, Oklahoma and Kansas should support planting and improve soil moisture. Some parts of the narrow strip of Oklahoma and Texas also began to sow seeds. The weather forecast for next week says that the temperature will get warmer and the rainfall will reach the average level.

In addition to the surge last Friday, the trading volume this week was light, and the position increased 3285 hands to 216798 hands. According to the data released by the Intercontinental Exchange (ICE), the inventory of No. 2 cotton delivery contracts that can be delivered by ICE has increased to 17137 bales as of May 7.

In uncertain times, the market tends to fluctuate, but recent signs of possible easing of trade tensions have boosted the stock market in the past week.

US tariffs have been in the headlines since January, but progress has been made this week. According to China News Agency, Washington/London, May 8, the United States and the United Kingdom announced a new trade agreement on the 8th. According to the agreement, Britain will expand market access to American agricultural products, and the United States will provide a certain degree of tariff relief for British cars.

Trade tensions disrupt the global supply chain, and the market responds quickly to the expected progress.

The Federal Open Market Committee announced this week to keep interest rates unchanged, citing the uncertainty surrounding tariffs and their potential impact on inflation and the labor market. The Federal Reserve hinted that it was not in a hurry to take action until the economic outlook became clearer. At the same time, the Bank of England cut its key interest rate by 25 basis points to 4.25%. It also pointed out the risks related to tariffs and efforts to protect economic growth in the face of continued uncertainty.

The US dollar is supported by the US UK trade agreement, the Bank of England's interest rate cut and the cautious stance of the Federal Reserve. The strengthening of the US dollar puts pressure on commodities and limits the rise of crude oil prices. Crude oil rose briefly due to the news of trade agreements. Nevertheless, oil prices fell sharply at the beginning of this week after OPEC announced its plan to increase production in June.

The export sales report released by the US Department of Agriculture (USDA) on Thursday showed that in the week ending May 1, the net export sales of US cotton in the current year increased by 65800 bales, 39% lower than the previous week, and 50% lower than the average of the previous four weeks. Next year, the net export sales of American cotton increased by 37400 bales. The export shipment of American cotton was 394900 bales, an increase of 8% over the previous week and 16% over the average of the previous four weeks.

The US Department of Agriculture will release the monthly crop supply and demand report on May 12 (Monday), providing the official forecast for the 2025/26 crop year for the first time. The US Department of Agriculture will estimate the output based on the planting intention report in March, which sets the US cotton planting area at 9.867 million acres. In the southwest, Texas accounts for 5.527 million acres, Oklahoma 413000 acres and Kansas 140000 acres. Although the planting area has decreased, the weather has been good recently, which may support a larger harvest. However, as May is usually the wettest month and the summer weather is often difficult to predict, the harvest scale in 2025 is still uncertain.

Several key inflation data will be released next week, including the US consumer price index (CPI) on Tuesday and the producer price index on Thursday. Crop progress reports and retail sales data will also be closely watched.