At 78.18 cents per pound, the average US cotton spot price fell nearly 500 points week-on-week, yet it remains 16 cents above the same period last year. The US cotton spot market is experiencing a classic divergence: futures are heating up while spot trades are cooling down. Data from China Customs and the USDA reveal a key contradiction. The ICE December contract settled at 88.22 cents/lb, up 1.08% in a single day, while the spot benchmark average dropped to a one-month low. This split suggests that speculative capital and industrial capital hold markedly different views on the market outlook.
Price Signals: Futures Rebound Masks Spot Weakness
From a contract structure perspective, the December contract's rise stems more from short covering and weather premiums than from end-user orders. The average spot quote range across seven designated markets narrowed to 77.24-79.46 cents/lb. Daily spot trading volume plunged from 6,975 bales the previous week to 2,570 bales. Cumulative volume for the current marketing year reached 16,193 bales, down 26.5% year-on-year. For spinning mills, higher futures prices actually dampened fixed-price procurement interest, as current yarn margins cannot cover raw material costs.
More notably, trading of cotton under Commodity Credit Corporation (CCC) loan collateral has stalled in both the Southeast and Southwest. This typically occurs when market prices fall below the loan redemption price, prompting farmers to pledge cotton to the government rather than sell at a loss. It signals that producers do not accept current spot prices, and a reluctance to sell is building.
Regional Industrial Belts: Texas Heat and Southeast Inquiry Vacuum
Texas, the core US cotton producing region, experienced sustained hot and dry weather this week, with daytime highs of 31-40°C and nighttime lows of 21-26°C. Irrigated fields in West Texas performed relatively well, but dryland fields deteriorated due to lack of effective rainfall. Farmers have begun applying defoliants and preparing for harvest. Kansas and Oklahoma also faced extreme heat. In Oklahoma, crops in many areas worsened further, and industry participants have adjusted production expectations downward.
In stark contrast to weather premiums, demand remains icy. In the Southeast market, mill buyers recorded "no inquiries and no transactions," as most mills have covered near-term to nearby raw cotton needs. On the export side, Vietnamese buyers made moderate inquiries for 31-grade color, 36mm length cotton, while Mexican agents focused on 41/42-grade color and 34mm+ length. However, no deals were concluded. This "inquiry-only, no-buy" pattern indicates overseas mills are also waiting, with immediate shipment demand yet to convert into actual orders.
Supply Chain Anxiety: Signals from the Texas Cotton Flow Conference
On September 9-10, the American Cotton Shippers Association hosted the Texas Cotton Flow Conference in Lubbock, focusing on market dynamics, supply chain concerns, and industry innovation. Against the backdrop of light spot trading and inactive forward contracting, the conference reflects widespread anxiety in the midstream: rising warehousing and logistics costs, pricing disagreements between farmers and ginners, and a competitive landscape reshaped by export orders shifting to Southeast Asia.
For Chinese textile enterprises, weaker US cotton spot prices do not equate to lower procurement costs. RMB exchange rate volatility, elevated ocean freight, and raw material substitution by Southeast Asian mills are all eroding US cotton's price advantage. If the domestic-international cotton price spread continues to narrow, Chinese spinners may increase inquiries for Xinjiang and Brazilian cotton, altering the blending structure in the fourth quarter.