On September 3, the most active cotton futures contract on ICE fell 2.79% to settle at 86.45 cents per pound, marking a third consecutive session of declines and touching the lowest level since August 19 during the session. Notably, this price is 7.7% below the week's high of 93.74 cents, which was the highest since early 2024. Such drastic fluctuations within a few days provide a window for the entire textile supply chain to re-examine supply-demand dynamics.
Market Background
The immediate triggers for this decline are twofold: first, widespread profit-taking across agricultural commodities shifted market sentiment from bullish to bearish; second, the USDA export sales report showed that net sales of upland cotton for the current marketing year were only 27,525 bales for the week ending August 27, a sharp 71% drop from the previous week's 95,700 bales. Net sales to China were a mere 1,722 bales, almost negligible. For the next marketing year, net sales were zero, signaling extremely weak forward buying interest from overseas buyers.
On the macro front, comments from Fed Governor Waller suggesting he would support holding rates steady if inflation pressures ease lowered expectations of further hikes, boosting U.S. stocks while the dollar index weakened. Theoretically, a weaker dollar supports dollar-denominated commodities, yet cotton fell against this backdrop, indicating that capital flows and sentiment are currently the dominant forces rather than currency moves. Meanwhile, geopolitical risks in the Middle East caused oil prices to fluctuate without providing clear direction for cotton.
Industry Impact
For textile enterprises, this pullback requires distinguishing between short-term sentiment and long-term trends. As an analyst at Price Futures Group noted, this decline is more about macro factors and profit-taking than fundamental changes. This implies that if global cotton supply-demand fundamentals remain unchanged, prices may stabilize after digesting speculative longs. However, weak export data—particularly the sharp drop in sales to China—deserves attention, as it may reflect a slowdown in Chinese buying of U.S. cotton or a shift to alternative origins such as Brazilian or Australian cotton.
For upstream ginners and traders, the drop in ICE futures will transmit directly to China's Zhengzhou cotton futures, compressing profit margins for imported cotton processing. For downstream weaving and apparel companies, lower raw material costs ease the pressure from earlier price surges, but if demand remains weak, product prices may fall faster than input costs, squeezing processing margins. Therefore, both buyers and exporters should reassess inventory strategies and hedging plans.