The latest USDA export sales data has cast a shadow over the cotton market. For the week ending June 25, US upland cotton export sales totaled 93,118 bales, with current-year sales at just 49,001 bales—a 42% drop from the previous week and 70% below the four-week average. This isn't just a weekly fluctuation; it signals a broad wait-and-see attitude across the global textile supply chain and the structural pressure from China's absence.
Export Structure: China Hits Pause
The most notable factor is China's silence. China purchased only 5,518 bales of current-year cotton and zero for the next marketing year. As the world's largest cotton importer, China's absence is a decisive blow. Industry data shows China has averaged over 2 million bales of US cotton annually over the past five years. Without that anchor, the export figures look thin.
This reluctance is no coincidence. Chinese textile mills have relatively high raw material inventories, and final order recovery has been slower than expected, curbing restocking demand. Meanwhile, competition from Brazilian and Australian cotton is intensifying—Brazilian cotton in particular is gaining share with competitive pricing and stable quality. This is a medium-term challenge for US cotton, not a one-week anomaly.
Price Range: The Logic of 75-80 Cents
Georgia-based cotton broker Keith Brown's assessment is straightforward: prices are likely to trade in a 75-80 cents/lb range. The logic is solid. 75 cents is near the cost of production for many US farmers—breaking below that would threaten acreage decisions. 80 cents is the psychological ceiling for mills; above that, buying interest fades.
But the range's durability depends on two variables. First, the dollar. The US added only 57,000 jobs in June (vs. 110,000 expected), sending the dollar index sharply lower. A weaker dollar is normally supportive for dollar-denominated cotton, but this time the export data overwhelmed that support. Second, when China returns to the market. If Chinese buyers remain on the sidelines, inventory pressure will build into the new crop, testing the 75-cent floor.
Chain Reaction: From Merchants to Mills
The weak export data was immediately reflected in futures. The ICE December contract fell 0.72 cents to 77.12 cents/lb, with weekly gains narrowing to 0.97%. For upstream merchants, this means margin compression. For downstream mills, it means the buying window may stay open longer.
For Chinese mills, current US cotton prices are in the middle of the range—neither cheap nor expensive. The key isn't the absolute price but the trend. If the 75-80 cent range breaks below 75, that's a clear restocking signal. If it rallies above 80, forward cost locking becomes necessary. With no clear directional driver, a just-in-time, phased purchasing approach is prudent.