Cotton prices dropped nearly 20% from May highs into late June. July futures prices spiked in May on tight supplies predicted in the USDA report. Great global crop conditions and strong speculative selling then spurred the current collapse. 
Credit: Barchart
Most notably, India has had a great start to the monsoon (unlike the last few years). Farmers are getting adequate rainfall, aiding in the irrigation already in place. India is the second largest producer in the world behind China. Another country that should have great production is the United States. The latest crop condition report (June 25th) showed 41% of the crop rated good & 11% rated excellent (best since 2010 for this time of year).
Cotton Sales
The oddity of this price drop is that export sales have been very strong. China’s glut of cotton has been dwindling over the past few years. On top of that, China cotton users need higher quality cotton to blend with the old supply.
The next fundamental news to watch will be the USDA acreage report on June 30th. With good conditions, most analysts expect this to be friendly for U.S. production. Traders will also continue to watch India and U.S. weather conditions. We have an Indian monsoon report coming to our clients soon, giving the forecast for the rest of the season. The slight drought in Texas cotton areas may begin to be noticed if it continues. See the dryness developing in northern Texas:
