US Cotton Export Plunge Signals Narrow Trading Range Ahead
The USDA's latest export sales report has dampened hopes for a demand recovery in cotton. For the week ending June 25, total net sales of US upland cotton reached 93,118 bales, but current-crop sales of just 49,001 bales were down 42% from the previous week and 70% below the four-week average.
Weakness in Export Structure
The most striking figure in the report is the near absence of Chinese buying. Net sales to China for the current crop year amounted to only 5,518 bales, while new-crop (2026/27) sales to China were zero. As the world's largest cotton consumer, China's retreat has directly dragged down overall export performance. Feedback from textile clusters indicates mills are adopting a hand-to-mouth procurement strategy, with orders dominated by short runs and small lots, showing little appetite for forward raw material commitments.
ICE cotton futures reacted swiftly. The most-active December contract fell 0.72 cents to settle at 77.12 cents/lb, a decline of 0.92%. The contract still posted a 0.97% weekly gain, reflecting ongoing two-way volatility. Georgia-based cotton broker Keith Brown's assessment is telling: he expects prices to trade in a 75-80 cents/lb range in the near term, suggesting that current levels around 77 cents are neither undervalued nor overvalued for industry funds.
Macro Crosscurrents
While the export data was bearish, the macro picture offered some offset. The US economy added just 57,000 jobs in June, far below the 110,000 expected. The unemployment rate edged down to 4.2% from 4.3%, but the quality of job growth raised concerns. The weak employment report eased fears of Fed rate hikes, sending the US dollar index sharply lower. A weaker dollar theoretically supports US cotton exports, but this transmission mechanism is currently overwhelmed by weak fundamental demand.
For Chinese textile mills, the key variable to watch is the spread between domestic and international cotton prices. If ICE cotton remains rangebound at 75-80 cents while Zhengzhou cotton futures stay elevated due to domestic supply-demand dynamics, the spread could widen further. This would benefit mills using imported cotton but put pressure on domestic cotton sales.