U.S. cotton export net sales plunged 42% week-on-week and 70% below the four-week average—a set of numbers that directly pressured the December contract at the 77-cent mark. Although the U.S. dollar index weakened significantly due to disappointing employment data, theoretically supporting dollar-denominated cotton, the market clearly remains more concerned about the real temperature of demand.
The Real Signal from Export Data
The latest USDA weekly export sales report shows that for the week ending June 25, current marketing year upland cotton net sales were only 49,001 bales, a 70% drop from the four-week average. Net sales to China were a mere 5,518 bales, and for the next marketing year, net sales to China were zero. What does this set of numbers mean? It is not merely short-term volatility; it reflects a significant contraction in procurement rhythm from the world's largest textile consumer—possibly due to ample inventories or expectations of lower future prices.
Meanwhile, next marketing year upland cotton net sales totaled 44,117 bales, again with no Chinese buyers. This is a relatively rare phenomenon for the same period in previous years. For the U.S. cotton market, which relies heavily on Chinese imports, this absence signal is worth alerting the entire supply chain.
The Double-Edged Sword of Macro Factors
This week's macro landscape actually offered a set of data that seemed bullish for cotton prices: the U.S. added only 57,000 jobs in June, far below the 110,000 expected by economists. The unemployment rate fell to 4.2% from 4.3%, but this largely reflects a declining labor force participation rate rather than genuine labor market strength. The U.S. dollar index tumbled on the day, which should theoretically boost dollar-denominated commodities.
But cotton futures did not gain enough upward momentum. This shows that at the current stage, market concerns about demand fundamentals have outweighed the short-term benefits from exchange rate fluctuations. When employment data is weak, the market might originally expect a stronger case for rate cuts to stimulate the economy, but the actual reaction was that weak demand could persist longer—not good news for industrial raw materials like cotton.
The 75-80 Cent Range: Industry Logic Behind the Trading Band
Veteran industry broker Keith Brown's judgment is clear: cotton prices are likely to trade in a 75-80 cents per pound range in the near term. The industry logic behind this judgment is worth examining.
- The 75-cent level is the psychological support for most U.S. cotton planting costs. Breaking below would materially impact planting intentions.
- The 80-cent level faces significant resistance from Southeast Asian spinners—with end-use apparel demand not yet strongly recovering, yarn profit margins are thin, and high raw material costs are hard to pass through.
- The current 77-cent level sits right at the midpoint of this range, where neither bulls nor bears have a clear advantage.
For Chinese textile enterprises, what does this range mean? If cotton prices oscillate between 75-80 cents, the spread between imported and domestic cotton will remain relatively stable, keeping raw material costs controllable for mills. However, if prices break below 75 cents, it could trigger expectations of acreage adjustment, bringing the risk of tighter future supply.