U.S. Cotton Exports Plunge and Weak Jobs Data Push Prices into 75-80 Cent Range

ICE cotton futures for December delivery fell 0.72 cents to settle at 77.12 cents per pound on July 2, a decline of 0.92%. The move was driven by the USDA's weekly export sales report for the week ending June 25, which showed net upland cotton sales of 93,118 bales. Current-year sales stood at 49,001 bales, down 42% from the prior week and a staggering 70% below the four-week average.

China, the world's largest cotton consumer, bought only 5,518 bales for the current marketing year and zero bales for the next marketing year. This continued reticence from Chinese mills has directly dampened ICE sentiment. The pattern is not new—since the onset of trade tensions, Chinese buying of U.S. cotton has been intermittent, but the timing now coincides with the Northern Hemisphere's critical crop development phase, intensifying inventory speculation.

Macro and supply-demand headwinds

Compounding the export weakness, the U.S. June employment report surprised to the downside, showing only 57,000 new nonfarm jobs versus the 110,000 economists had expected. While the unemployment rate edged down to 4.2%, the tepid job growth signals a slowing recovery. The dollar index plunged on the news, which normally supports dollar-denominated cotton, but the export data overwhelmed any currency benefit.

This divergence—a falling dollar yet stagnant cotton prices—is unusual. Typically, a weaker dollar encourages overseas buying, but mills in China, Vietnam, and Bangladesh are struggling with weak end-demand and high finished-goods inventories. Even if imported cotton becomes cheaper in local currency terms, actual restocking remains subdued.

Industry impact: trading range and transmission

Georgia-based cotton broker Keith Brown noted that prices are likely to oscillate between 75 and 80 cents per pound near term. This assessment captures the market's central tension: a ceiling formed by weak exports and demand, and a floor supported by U.S. production costs, dollar volatility, and potential output cuts in India and Brazil.

For Chinese textile mills, ICE cotton near 77 cents keeps imported fiber competitive against Xinjiang cotton, but currency risk is rising. If the weak jobs data delays Fed rate hikes and the dollar continues to weaken, hedging costs for import letters of credit will become more variable. For production bases in Vietnam and Indonesia that rely on transshipment, a break below 75 cents could trigger concentrated fixing, temporarily lifting spot trade.

Spot market holds firm

In contrast to futures, the Cotlook A index rose 100 points to 86.55 cents per pound on July 2. The strength reflects lingering fixations from earlier contracts, traders' firm offers for high-grade Australian and Brazilian cotton, and elevated Indian domestic prices that support the global floor. However, this spot-futures spread is unlikely to persist if ICE continues to slide.

Practical recommendations

For buyers - With the ICE front-month trading in a 75-80 cent range, adopt a phased fixing strategy—lock in some forward shipments near the lower end (75-76 cents) to avoid clustering purchases. - Monitor the RMB exchange rate; if the dollar weakens further due to the jobs data, delay foreign exchange settlement for imported cotton to reduce actual costs. - China's persistently low signings are a market signal; domestic mills should prioritize using existing import quota inventories rather than chasing additional purchases at elevated levels.

For foreign trade firms - When quoting U.S. cotton export orders, shorten the validity period to 3-5 days and include currency fluctuation clauses to hedge against sudden dollar declines. - Watch the post-Independence Day export sales report; if Chinese bookings remain absent, ICE may test the 75-cent support level, offering an opportunity to hedge on deferred contracts. - Buyers in Southeast Asia are highly price-sensitive; proactively communicate with Vietnamese and Indonesian clients to lock in long-term supply prices during this range-bound market.