US-China tariff truce, oil rally lift ICE cotton

13 May '25

3 min read

US-China tariff truce, oil rally lift ICE cotton

Pic: Shutterstock

Insights

ICE cotton futures rose slightly on Monday after a sharp intraday rally, supported by easing US-China trade tensions and higher crude oil prices, which boosted polyester fibre costs.
However, weak global consumption projections limited gains.
USDA raised the 2025-26 harvested area and production estimates, adding supply pressure.
Brazil's cotton exports fell 16 per cent YoY in early May.

ICE cotton futures edged higher after a steep intraday rise on Monday. Cotton futures turned positive following an easing of trade tensions, as the US and China announced a tariff agreement yesterday. A rise in crude oil prices also supported cotton futures by increasing the cost of polyester fibre, a man-made alternative to cotton. However, projections of mild global cotton consumption acted as a negative factor for the market.

The ICE cotton July 2025 contract settled at 66.63 cents per pound (0.453 kg), up 0.02 cent from the previous day. The December contract settled at 68.85 cents, also up 0.18 cent. Other contracts ranged from 2 points lower to 20 points higher.

Intraday highs were much stronger, with July peaking at 68.89 cents (226 points above the close) and December reaching 70.50 cents per pound (165 points above the close), indicating that early optimism faded by the close.

Daily volume surged to 63,602 contracts, more than double Friday’s volume of 31,117, reflecting increased market participation following the report and trade talk news. Certified stock as of Friday rose to 22,250 bales, with 5,529 bales added in Dallas alone; the total for the week was 7,673 bales. Nearly 50 per cent of new certificates were issued in Olam-owned warehouses, with the rest in independently operated facilities—suggesting that Olam may deliver against the July contract. No bales were awaiting USDA review, indicating efficient processing of cotton certifications.

The USDA WASDE report raised the 2025-26 harvested area forecast to 8.37 million acres, up from 7.81 million acres in 2024-25. US cotton production is now projected at 14.5 million bales, slightly above last year’s 14.41 million bales, adding supply-side pressure.

Traders were disappointed as the report lacked strong global consumption estimates, which had been expected to support higher prices.

External markets were also in positive territory. Crude oil jumped nearly 2 per cent to a two-week high. US stock indexes, particularly the S&P 500, reached their highest levels since early March, providing broader market support.

Brazil's Secex reported cotton exports at 55,042.20 tons in the first half of May, with daily average exports down 16 per cent year on year at 9,173.70 tons per day, compared to 10,925.42 tons per day last May.

Currently, ICE cotton for July 2025 is trading at 66.85 cents per pound (up 0.22 cent), cash cotton at 64.88 cents (up 0.02 cent), the October 2025 contract at 69.44 cents (up 0.66 cent), the December 2025 contract at 69.24 cents (up 0.39 cent), the March 2026 contract at 70.50 cents per pound (up 0.40 cent), and the May 2026 contract at 71.46 cents (up 0.45 cent). A few contracts remained at their previous closing levels, with no trading recorded today.

Fibre2Fashion News Desk (KUL)

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