US cotton futures came under fresh selling pressure in early July, with the benchmark December contract falling 0.72 cents to settle at 77.12 cents per pound. While the immediate trigger was the weak export sales report from the USDA, the deeper issue lies in the slower-than-expected recovery of global textile demand, compounded by anomalous signals in the macro employment data, prompting a cautious market sentiment.
Export Structure Exposes Demand Weakness
The USDA's weekly export sales report for the week ending June 25 showed net sales of upland cotton for the current marketing year at only 49,011 bales, down 42% from the previous week and a sharp 70% below the prior four-week average. Sales to China were a mere 5,518 bales, while forward sales to China for the next marketing year were zero.
These figures send two critical signals: overseas buyers' restocking appetite has clearly cooled, and China, the world's largest cotton importer, has significantly slowed its purchasing pace. For the US cotton industry, which relies heavily on exports, this is a clear warning. Industry analysts now expect cotton prices to oscillate in the 75-80 cents per pound range in the near term, lacking momentum for a breakout.
Macro Tailwind Fails to Lift Commodities
Notably, the same day saw the release of a much weaker-than-expected US June employment report—only 57,000 new jobs were added versus the consensus estimate of 110,000. This caused the US dollar index to tumble, which theoretically should have boosted dollar-denominated commodities. However, cotton futures failed to rally, succumbing instead to the weight of the export data.
This suggests that pricing power for cotton has shifted from macro liquidity back to industrial fundamentals. The dollar's weakness could not offset demand-side softness, reflecting deepening market doubts about actual consumption recovery. For domestic textile mills, this means that while import costs may be somewhat buffered by a weaker dollar, order-side uncertainty persists.
Industrial Transmission: From US Cotton to China's Textile Chain
The choppy pattern in US cotton prices is transmitting down the domestic supply chain. On one hand, weaker import price expectations help ease raw material cost pressure for yarn spinners, especially given the sluggish recovery in domestic demand, making cost control a survival imperative. On the other hand, the weak export signal warns mills against overstocking and urges flexible procurement strategies.
From a regional industrial cluster perspective, processing enterprises in the Yangtze River basin and Xinjiang cotton regions must closely watch the spread between domestic and imported cotton prices. If US cotton continues to weaken while domestic prices remain relatively firm, the cost advantage of imported cotton will become more pronounced, potentially prompting some mills to increase their import ratio.