The 75-cent mark is once again in focus. On July 2, ICE cotton futures for December delivery settled at 77.12 cents per pound, down 0.92% on the day. On the surface, this appears to be a routine pullback, but two key variables behind the move are reshaping industry expectations: a sharp decline in export demand and conflicting signals from macroeconomic data.
Why Export Data Rattled the Market
The USDA's latest weekly export sales report was the direct trigger for the decline. For the week ending June 25, current marketing year upland cotton net sales were only 49,001 bales, down 42% from the previous week and 70% below the prior four-week average. Forward sales for the next marketing year were also weak at 44,117 bales, with zero net sales to China.
What does this mean? For textile mills that rely on US cotton as a raw material benchmark, the demand-side contraction is breaking the previous expectation of a balanced supply-demand dynamic. The wait-and-see attitude of Chinese buyers—the world's largest cotton consumer—toward new crop contracts directly caps the upside potential for deferred futures.
Why a Weaker Dollar Failed to Support Prices
On the same day, the US June employment report came in well below expectations, with only 57,000 new jobs added versus the 110,000 economists had forecast. This sent the US dollar index sharply lower, which in theory should have supported dollar-denominated commodities. But cotton did not benefit, indicating that the market's dominant logic has shifted from currency costs to real demand.
For textile mills, this sends a pragmatic signal: even if import costs fall due to a weaker dollar, it remains uncertain whether downstream orders can absorb additional raw material inventories. The decoupling of cotton prices from the exchange rate precisely reflects the cautious sentiment at the end of the supply chain.
What the 75-80 Cent Range Implies
Georgia-based veteran cotton broker Keith Brown offered a clear judgment after the report: near-term prices are likely to trade in a 75-80 cents per pound range. This range serves as a critical psychological anchor for buyers.
- If cotton prices break below 75 cents, it may trigger concentrated restocking by major buyers like China, forming a temporary floor.
- A rebound above 80 cents would require confirmation of sustained improvement in US export sales, particularly Chinese purchasing interest for new crop contracts.
- At the current level around 77 cents, merchants holding inventories are near breakeven, creating a balance between selling pressure and reluctance to sell.
Transmission Paths to the Textile Supply Chain
This round of US cotton price volatility is affecting the domestic textile industry through three channels:
First, imported cotton cost expectations are being revised downward. If the 75-80 cent range is confirmed, it means landed costs for the next one to two months will be lower than previous highs, benefiting coastal spinning mills that use a high proportion of foreign cotton.
Second, the domestic-import price spread may widen again. If US cotton remains weak while domestic Xinjiang cotton prices stay firm due to tight supply, a wider spread will stimulate import substitution demand, which in turn limits further downside for US cotton.
Third, yarn pricing faces a dilemma. Lower cotton prices should theoretically lead to lower yarn prices, but with downstream fabric and garment orders recovering slowly, mill inventories are already at elevated levels. The conflict between destocking through price cuts and protecting profit margins will become more acute.