The U.S. cotton market is undergoing a demand-led price correction. The latest USDA export sales report showed net sales of upland cotton for the current marketing year totaled 49,001 bales for the week ending June 25, down 42% from the previous week and a staggering 70% below the prior four-week average. This data directly suppressed the rebound momentum of ICE cotton futures, with the most-active December contract falling 0.72 cents to settle at 77.12 cents per pound, compressing the weekly gain to just 0.97%.
Key shifts in export structure
A breakdown by destination reveals two major concerns in the trade flow. First, sales to China dropped sharply: current-year net sales to China were only 5,518 bales, while new-crop (2026/27) sales to China were zero. Given that China is the world's largest cotton importer and consumer, this signals potential pressure on U.S. shipment schedules in the coming weeks. Second, the overall plunge in total commitments is not attributable to a single market but reflects a collective contraction in global textile end-demand amid macroeconomic uncertainty.
The report's release coincided with the U.S. Independence Day holiday, when market participation is typically thin. Yet the weakness exceeded many traders' expectations. Keith Brown, chief cotton broker at Keith Brown and Co. in Georgia, noted that the market lacks clear bullish catalysts and that prices will likely oscillate within a 75-to-80-cent range in the near term. For textile mills, securing lower raw-material costs may require waiting for a clearer exhaustion of bearish factors.
Macro vs. industrial divergence
In contrast to cotton's weakness, the macro backdrop turned supportive for commodities. The U.S. Labor Department reported that the economy added only 57,000 jobs in June, well below the 110,000 expected. The disappointing data reduced the urgency for the Federal Reserve to raise interest rates, sending the U.S. dollar index sharply lower. A weaker dollar typically boosts dollar-denominated commodity prices, but cotton failed to follow this logic, indicating that fundamental supply-demand factors—specifically weak buying interest—are outweighing financial influences.
Meanwhile, U.S. stocks rose on the jobs report, with the Dow Jones Industrial Average closing at a record high as markets interpreted 'bad news as good news'—slower growth could pave the way for policy easing. This reasoning, however, does not hold in the cotton supply chain: textile mills care more about order recovery than capital-market liquidity expectations. As long as destocking at the yarn and fabric stages remains incomplete, any cotton price rally will lack industrial support.
Spot market follows lower
The bearish sentiment has already transmitted to the physical market. On July 2, the Cotlook A Index stood at 86.55 cents per pound, up 100 points from the previous day, but this was more a lagged reflection of earlier contract settlements than evidence of active spot trading. Historically, when ICE futures break below 78 cents, the Cotlook A Index typically follows with a one-to-two-day delay. In the coming week, the spot index is likely to give back those gains and find a new equilibrium with futures.
For Chinese textile mills, the sharp drop in U.S. cotton sales to China is not entirely negative. It implies a potential oversupply of deliverable cotton on the international market, giving buyers greater negotiating power. However, if weather issues in key U.S. growing regions disrupt new-crop production, the current weakness may prove to be a short-lived window.