US cotton futures are experiencing a cooling sentiment. The latest export sales data fell far below market expectations, overwhelming the support from a weaker dollar. The ICE December contract settled at 77.12 cents per pound, down 0.92% in a single day. For textile companies that rely on stable raw material costs, this signal is worth noting: cotton prices may enter a lower and narrower range in the short term.
Weak Export Data: More Than Just Numbers
The USDA's weekly export sales report showed that for the week ending June 25, net export sales of US upland cotton for the current marketing year were only 49,001 bales. This figure is down 42% from the previous week and a sharp 70% decline from the average of the prior four weeks. More concerning to the market, net sales to China were only 5,518 bales, with zero sales to China for the next crop year.
As the world's largest cotton consumer, the absence of Chinese buyers is always a bellwether. The slowdown in cumulative export sales for the current year suggests the inventory digestion cycle for US cotton may be prolonged. For textile mills, this means no immediate tightness in raw material supply, but the risk of price volatility is shifting toward buyers.
Macro vs. Industry Fundamentals
The US dollar index fell sharply after weaker-than-expected employment data. The US economy added only 57,000 jobs in June, far below the 110,000 economists had forecast. In theory, a weaker dollar should boost the export competitiveness of dollar-denominated commodities and support cotton prices. However, the real weakness in demand has overshadowed the exchange rate benefit.
Georgia-based cotton broker Keith Brown's view reflects industry consensus: cotton prices are likely to oscillate in the 75-80 cents per pound range in the near term. This implies that current prices near 77 cents still have room to fall. For spinning mills, the buying window may appear at the lower end of the range, not at the current level.
Transmission Along the Supply Chain
The impact of weaker cotton prices is not unidirectional. Upstream cotton farmers face pressure on selling prices and may delay forward sales of new crop cotton. Midstream traders need to reassess inventory costs and hedging strategies. For downstream textile companies, especially yarn and fabric mills focused on exports, lower raw material costs help restore profit margins, provided that end-user orders also recover.
It is worth noting that trading volumes tend to thin ahead of the US Independence Day holiday, which could amplify short-term volatility. For China's textile industrial clusters—from Xinjiang cotton regions to spinning hubs in Shandong, Jiangsu, and Zhejiang—the key question is whether lower US cotton prices will change the price spread between imported and domestic cotton, thereby altering raw material procurement structures.