A 224% single-week surge in export sales, yet ICE cotton still closed lower — this kind of "good news that fails to lift prices" divergence deserves more attention from textile buyers than any one-way trend. On September 25, the most-active December contract settled at 82.71 cents/lb, down 0.72% on the day but still up 1.92% for the week. On the surface it looks like a tug-of-war; in reality, macro capital flows and industry fundamentals are arm-wrestling.
Export Data vs. Macro Pressure
The USDA weekly export sales report was the week's hardest bullish signal. For the week ending September 17, current-crop U.S. upland cotton net sales reached 230,517 bales, up 224% from the prior week and 244% above the four-week average. That means overseas buyers are accelerating restocking, especially in Southeast Asia and Turkey. But the same report showed net sales to China fell by 4,702 bales for the current season and stood at zero for the next season — the absence of Chinese buying is the most glaring gap in this export rebound.
Pressure comes from two directions. The dollar index edged back from a near two-month high but was still poised for a second consecutive weekly gain, as Fed officials' inflation concerns fueled expectations of further rate hikes and pushed Treasury yields sharply higher. Meanwhile, Chicago wheat futures fell and oil dropped more than 2% as markets weighed a possible U.S.-Iran ceasefire. Lower oil prices directly reduce polyester staple fiber production costs, eroding cotton's price competitiveness. Rogers Varner, president of VarnerBrokerage, put it bluntly: the dollar has broken upward, not by much, but enough.
Drought and Supply-Side Concerns
More important for mills than the futures screen is the supply-side signal. A document compiled by the USDA's Office of the Chief Economist based on the drought monitor showed that as of the week ending September 22, about 72% of U.S. cotton areas were affected by drought, up from 65% the prior week and just 49% a year earlier. Rising drought coverage means downside risks to new-crop yields and grades, especially spinnability metrics in core areas like Texas.
The transmission path downstream is clear: if drought persists, U.S. cotton spot premiums will widen and the scarcity of high-grade cotton will become more pronounced. The Cotlook A Index stood at 93.75 cents/lb on September 25, up 50 points, already reflecting this structurally tighter expectation. For Chinese spinners, higher imported cotton costs will squeeze blending margins, especially for mills producing medium-to-high count yarns, which may be forced to raise the share of domestic or Brazilian cotton in their blends.
Real Impact on the Supply Chain
The current contradiction in the cotton market: strong export sales show demand hasn't collapsed, but a strong dollar and cheaper substitutes are capping valuations. In this setup, ICE cotton will likely trade in an 80-85 cents/lb range in the near term, with a breakout requiring new weather themes or the return of Chinese buying.
For China's textile chain, two judgments matter. First, zero net sales to China for the next season, combined with lower current-season net sales, shows Chinese buyers prefer to wait amid inverted domestic-import price spreads, relying more on state reserves and Xinjiang cotton. Second, if U.S. drought worsens, stronger foreign basis will push up landed imported cotton costs, and exporters must recalculate raw material costs when taking orders to avoid margin erosion during pricing cycles.