82.89 cents per pound. That was the settlement price for ICE cotton's December contract on September 23, a gain of just 0.02 cents from the prior session. On the surface, it looks like a quiet sideways market. But dig into the data, and the real story is not about futures positioning at all. It is about China's continued absence from the US cotton export market, where net sales to the world's largest consumer have been stuck at zero.
The Buying Vacuum Behind the Export Numbers
The USDA's weekly export sales report for the week ending September 10 showed net upland cotton sales of 71,231 bales for the current marketing year, down 4% from the previous week and 30% below the four-week average. More tellingly, net sales to China stood at zero bales, both for the current year and the next marketing year. China, in other words, is systematically sitting out the US cotton market.
This is not an accident. From a supply chain perspective, Chinese textile mills are navigating a split order book. Domestic demand remains relatively stable, but export orders have slowed as overseas brands work through inventory adjustments. When end-use demand is uncertain, mills naturally prefer to draw down existing stocks or pivot to Brazilian and Australian cotton. The price advantage of US cotton has been further eroded by a stronger dollar.
For international merchants, China's vacuum means pricing power tilts toward buyers. But for Chinese mills, this is not an unqualified positive. If US cotton prices remain under pressure from weak exports, the global price center of gravity could shift lower, eventually feeding back into domestic seed cotton procurement prices and farmer incomes.
Dollar Strength and Rate Hike Expectations
The other force capping cotton prices is macroeconomic. The Federal Reserve raised rates by 25 basis points last week, lifting the target range to 3.75%-4.00%. Several officials subsequently hinted that further hikes are possible if inflation does not cool. The dollar index has climbed to its strongest level in nearly two months.
A stronger dollar affects the textile chain in two directions. First, dollar-denominated cotton becomes more expensive for buyers holding other currencies, dampening purchasing interest. Second, the renminbi faces depreciation pressure against the dollar, squeezing Chinese exporters with currency losses and reduced quote competitiveness.
Oil prices, meanwhile, settled nearly 4% higher as traders weighed geopolitical risks against the global inflation outlook. Softer oil could have shifted inflation and monetary policy expectations, but the market is clearly focused on the Fed's hawkish signals. This macro uncertainty is making textile companies more cautious about placing long-term orders.
The spot market tells a similar story. The Cotlook A Index stood at 93.25 cents per pound on September 22, down 40 points, echoing the sideways futures market. A weakening spot index suggests actual transaction prices have not followed futures higher, and mill buying interest remains subdued.
Industrial Belt Reactions and Price Expectations
Among China's major textile clusters, chemical fiber fabric hubs such as Keqiao and Shengze are relatively insensitive to cotton price swings. But cotton spinning centers in Nantong and Foshan are broadly adopting a hand-to-mouth purchasing strategy. This low-inventory operating mode will continue to suppress cotton procurement demand in the near term.
For upstream ginners, the current situation means new crop procurement must be more restrained. If international cotton prices continue oscillating in the 82-84 cents range, domestic seed cotton opening prices will face downward pressure, and the bargaining game between farmers holding back supply and ginners pushing prices lower could intensify.
Over a longer horizon, when Chinese buying returns depends on two variables: whether overseas apparel brands begin restocking, and whether the US-China trade policy environment improves. With both uncertain, cotton prices are likely to remain range-bound, lacking fundamental support for a one-way move.