A heavy rain event during the boll-opening period has added fresh uncertainty to an already bearish US cotton market. ICE December cotton settled at 78.88 cents/lb last Friday, up 1.44% on the day, yet still down 4.6% for the week. USDA export data showed net sales fell 12% week-on-week, while shipments dropped 9%. The simultaneous weakness in both price and trade volume suggests this is not merely short-term sentiment noise but a genuine contraction on the demand side.
Weather Premium vs. Demand Discount
Persistent heavy rain across key US growing regions has coincided with the boll-opening stage. Exposed cotton fibers hit by rain suffer quality degradation — fiber length, strength, and color grades can all be affected. Severe thunderstorms and strong winds may also cause physical yield losses. This means the market's earlier optimistic production expectations need reassessment, and the weather premium offers some near-term support.
However, weather alone cannot reverse the weekly decline. A stronger dollar makes dollar-denominated cotton more expensive for overseas buyers, while global textile demand recovery remains weaker than expected, with downstream mills reluctant to restock aggressively. Marginal supply reductions and trend-level demand weakness offset each other, but the balance still tilts bearish. For buyers, current levels are not a strategic entry window; maintaining hand-to-mouth purchasing and waiting for clearer demand signals is more prudent.
Polyester Substitution Effect Intensifies
The G7 agreed to release 100 million barrels of strategic oil reserves through the IEA, with a concentrated release of diesel in the first 20 days over a four-month period. International oil prices fell on the news, with European diesel futures dropping over 4%.
The transmission path to cotton is clear: lower oil prices reduce naphtha and downstream polyester feedstock costs, widening the price advantage of polyester staple fiber — cotton's most direct substitute. As the polyester-cotton spread widens, mills will tend to increase polyester ratios in their blending formulas, squeezing natural fiber consumption.
Importantly, this substitution effect is not immediate but unfolds through mill blending adjustments and order structure changes. Historically, after four to six weeks of sustained low oil prices, the spread's influence on blending ratios becomes pronounced. Textile enterprises should closely monitor the polyester-cotton spread as a key reference for cost optimization.
Structural Signals in Export Data
USDA's latest export sales report showed net upland cotton sales of 202,567 bales for the week ending September 24, down 12% week-on-week but up 101% from the four-week average. Net sales to China were 38,370 bales, while next-crop-year net sales to China were zero. Shipments totaled 149,507 bales, down 9% week-on-week and 11% from the four-week average, with only 1,323 bales shipped to China.
Two key judgments emerge. First, the divergence between weekly and four-week-average figures indicates highly volatile purchasing patterns — buyers concentrate orders at price lows rather than buying steadily, reflecting strong wait-and-see sentiment. Second, zero next-crop-year sales to China, combined with weak current shipments, suggests uncertainty remains over the recovery of US-China cotton trade flows, with Chinese buyers shifting procurement toward Brazil, Australia, and other alternatives.
For domestic textile enterprises, import source diversification is now an established trend. Mills in industrial clusters like Keqiao and Shengze should secure non-US cotton resources in advance to avoid temporary supply tightness caused by trade flow restructuring.
Spot Market Under Parallel Pressure
The Cotlook A Index stood at 88.35 cents/lb, down 80 points on the day, moving in tandem with futures. Narrowing spot premiums typically signal weak immediate demand and increased seller willingness to move cargo.
From a supply chain perspective, the decline in raw material prices has not yet effectively transmitted to yarn prices, squeezing mill margins. If cotton prices continue to weaken, yarn quotations will face downward pressure, affecting cost calculations in weaving and fabric segments. Exporters should note that quotation validity periods should be shortened to avoid dual losses from raw material price fluctuations and currency exposure.