At 78.88 cents per pound, the ICE December cotton contract settled higher by 1.44% on October 2, yet that single-day gain could not mask a 4.6% weekly decline. Behind this number, three forces are tightening simultaneously: weather, exports and energy. For China's textile supply chain, falling international cotton prices are not a simple positive—they are reshaping procurement rhythm and the relative pricing of substitute fibers.
Weather and Exports Pull in Opposite Directions
US growing regions saw heavy rain this week, with more expected. Cotton bolls are now opening, and exposed fiber that gets soaked will lose quality grade; severe thunderstorms and strong winds can also cause yield losses. A risk management consultant at StoneX noted the market is in a clear downtrend, and rain-driven quality concerns are only a brief disruption within a weak trend, not a reversal signal.
Export data is equally uninspiring. USDA reported that for the week ending September 24, current-crop US upland cotton net sales reached 202,567 bales, down 12% from the prior week but up 101% from the four-week average. Net sales to China were 38,370 bales. For the next marketing year, net sales totaled 39,160 bales, with zero to China. Shipments for the week were 149,507 bales, down 9% week-on-week, with only 1,323 bales shipped to China.
Shipment data deserves more attention than sales figures. A week-on-week decline in sales suggests buyers are waiting during a price downturn, while weaker shipments indicate actual logistics are already slowing. Extremely low shipments to China reflect that domestic mills currently prefer to draw down port stocks or turn to Brazilian and Australian origins.
Oil Prices and the Substitution Effect
The G7 agreed to release 100 million barrels of diesel and crude from emergency reserves, starting immediately and lasting four months, with a concentrated diesel release in the first 20 days. International oil prices fell on the news, with European diesel futures dropping over 4%.
The path from lower oil to lower cotton prices is clear: polyester, a petroleum-based synthetic fiber, is the most direct substitute for cotton at the yarn stage. Falling oil prices reduce polyester staple fiber production costs. When the price gap between polyester and cotton widens, yarn mills and fabric factories adjust their fiber blending ratios, weakening demand for natural fibers.
This transmission is not instant, but the direction is clear. For buyers, the key is whether the polyester-cotton spread continues to widen over the next four to six weeks. If polyester prices follow oil downward while cotton holds firm on weather premiums, the substitution effect will accelerate.
In the spot market, the Cotlook A Index stood at 88.35 cents per pound, down 80 points, broadly in line with futures. The spot premium has not widened significantly, suggesting traders are not strongly holding back supply and prefer to sell at market prices.
Transmission Through the Supply Chain
The lag from futures to spot to yarn typically runs two to four weeks. The 4.6% weekly drop in ICE cotton will gradually transmit to imported cotton spot at Chinese ports through on-call contracts and basis quotes. For traders who locked in resources at higher levels, a weakening basis could bring paper losses; for mills that have not yet priced, a short-term procurement window is opening.
But the weather variable cannot be ignored. If rain continues and downgrades US cotton quality, high-grade supply will tighten and grade spreads may widen. Low-grade cotton prices would then face pressure, while premiums for high-grade cotton would expand. This means procurement strategy cannot focus on absolute prices alone—it must consider the specific grades needed and their substitutability.
Another signal to watch is zero net sales to China for the next marketing year. This does not mean Chinese buyers are entirely absent, but rather that forward commitments have not yet started. Once the domestic-international price spread returns to a reasonable range, forward commitments could be released in a concentrated manner, providing阶段性 support to international cotton prices.
For Buyers - Monitor the polyester-cotton spread; if it continues to widen, consider increasing polyester blending ratios to control raw material costs - Buyers needing high-grade cotton should lock in grade-specific resources early to guard against quality downgrades and widening grade spreads - For unpriced import contracts, use the current futures pullback to price in batches rather than concentrating operations
For Exporters - With US cotton shipments to China persistently weak, reassess shipping schedules and port inventory turnover to avoid demurrage costs - Watch oil prices after the G7 reserve release; if oil stays low, polyester fabric quotes may face customer pressure - If forward sales to China resume in bulk, international cotton prices could rebound; export quotes should include price adjustment clauses
Overall, cotton prices are caught between weather premiums and weakening demand. A single-day rebound does not change the weekly downtrend, but quality concerns provide bottom support for high-grade cotton. What the supply chain needs is not to call the absolute bottom, but to manage grade structure and the relative pricing of substitute fibers.