Export Data Chills, US Cotton Futures Under Pressure: 75-80 Cent Range Likely Near-Term Norm

The US cotton futures market did not see the expected Independence Day rally in early July, instead being pulled down by a weak export sales report. The ICE December contract settled at 77.12 cents per pound, down 0.92% on the day. This is another confirmation after weeks of unclear demand signals.

Export Data Turns Cold: Demand Side Compressing

The USDA's weekly export sales report showed that for the week ending June 25, net sales of upland cotton for the current marketing year were 49,011 bales, down 42% from the previous week and a sharp 70% below the prior four-week average. Sales to China were only 5,518 bales. For the next marketing year, net sales to China were zero.

This set of data means that China, the world's largest cotton consumer, has significantly reduced its purchasing appetite recently. For upstream merchants and downstream mills, this is not an isolated event—it reflects a phase of slowing demand in the global textile and apparel end market after the inventory replenishment cycle.

Why Did the Weaker Dollar Fail to Provide Support?

On the same day, the US Department of Labor reported June employment figures far below expectations, with only 57,000 new jobs added versus the 110,000 forecast. This caused the US dollar index to slump. Typically, a weaker dollar supports dollar-denominated commodities, but this time the negative impact of the export sales data completely overshadowed the currency benefit.

The underlying logic is that the core issue in the cotton market is not currency pricing, but real physical demand. Textile mills and traders care more about whether orders exist and whether inventories can be cleared. Without signs of recovery in end-user retail, even a weaker dollar is unlikely to stimulate large-scale buying.

What the Trading Range Means for the Supply Chain

Georgia-based cotton broker Keith Brown noted that prices are likely to oscillate in the 75-80 cents per pound range in the near term. This view is widely shared among market participants. For textile companies, this means input costs will enter a relatively stable but inelastic window.

• For spinners: Raw material purchases need not be rushed; buying opportunities can be sought at the lower end of the range.
• For weavers and fabric mills: Monitor the speed of price transmission to cotton yarn. If cotton stays low, cotton yarn quotes may soften.
• For traders: In a range-bound market, basis trading and option strategies are more prudent than betting on directional moves.

Practical Recommendations

For Buyers - Watch the technical support level near 75 cents/lb; a break below could be a medium-term buying opportunity. - Reduce the proportion of long-term fixed-price contracts; use phased pricing or floating basis contracts to cope with range fluctuations. - Closely track bonded cotton inventory and release pace at major Chinese ports, as domestic supply pressure may offset external price gains.

For Foreign Trade Companies - Use 77 cents/lb as a baseline for export order pricing, leaving a 2-3 cents/lb buffer for volatility. - Be alert to the linkage between the RMB exchange rate and US cotton prices: if the dollar weakens and the RMB strengthens, export margins could be squeezed from both sides. - Use ICE options to build protective strategies, such as buying put options to lock in a minimum selling price.