The main ICE cotton futures contract is hovering around the 77 cents/lb mark, but market sentiment has not warmed despite the price stabilization. The latest export sales data poured cold water on the bulls: for the week ending June 25, total net upland cotton export sales were only 93,118 bales, with current marketing year commitments plunging 42% from the previous week and a staggering 70% below the prior four-week average. Behind this number lies a collective wait-and-see attitude among international buyers towards high cotton prices, and a clear signal of China's phased withdrawal from purchasing.
Demand-Side Gap Appears
In current marketing year export sales, China signed only 5,518 bales, and for the next marketing year, Chinese new sales were zero. This 'cliff-like' purchasing behavior is no accident—domestic textile mills are squeezed by weak end-order demand and high finished goods inventories, with raw material restocking intentions falling to their lowest point this year. Southeast Asian spinning mills are also digesting earlier high-priced inventories, with very limited new buying interest. This USDA report reveals a harsh reality: global cotton immediate demand is rapidly shrinking.
Weaker Dollar Fails to Rescue
Typically, a sharp drop in the US dollar index provides support for dollar-denominated commodities. On July 2, the US June nonfarm payrolls data missed expectations significantly—only 57,000 new jobs were added, less than half the market forecast—and the dollar tumbled. However, this exchange rate dividend was almost entirely offset by the weak export sales data. This indicates that the main contradiction in cotton prices has shifted from macro liquidity to industrial fundamentals. Even if the dollar continues to weaken, without follow-through from real orders, cotton prices will find it difficult to sustain upward momentum.
Trading Range Further Confirmed
Georgia cotton broker Keith Brown's assessment is being validated by the market: 75-80 cents/lb will be the core trading band for the coming weeks. Technically, the December contract is testing around 77 cents, with 75 cents as a hard support level formed by inventory costs and farmer holding sentiment, while 80 cents represents the upper limit of what spinning mills can accept for procurement. A break of this range would require either an unexpected supply disruption or a substantive demand recovery.
Transmission to China's Textile Supply Chain
The current narrow trading range of US cotton presents both opportunities and traps for Chinese cotton textile enterprises. The opportunity lies in the fact that if cotton prices consolidate around 77 cents/lb for an extended period, the domestic-foreign cotton price spread will remain relatively stable, helping mills lock in forward costs. The trap is that if downstream orders remain weak, mills may fall into a negative cycle of 'the more prices fall, the less they buy'—inventory depreciation expectations will suppress all active restocking behavior.