ICE cotton futures for December fell 2.76% to 79.30 cents per pound on July 16, driven by a USDA export sales report showing net sales of just 34,360 bales for the current marketing year—the lowest weekly total this season. The data signals a deepening demand contraction across the global textile supply chain.
Export Data Reflect Global Demand Weakness
According to the USDA weekly report for the week ending July 9, U.S. upland cotton export sales dropped 48% from the previous week and 63% below the four-week average. Sales to China turned negative at minus 32 bales, while forward sales for the next marketing year to China stood at zero. This suggests that Chinese buyers, the world's largest cotton consumers, have pulled back sharply at current price levels.
Shipments also weakened: total exports reached 214,893 bales, down 7% week-over-week and 14% below the four-week average. Shipments to China totaled only 3,348 bales, a negligible share. The combination of weak new sales and slow shipments is compressing the upside for ICE cotton.
U.S. Retail Data Adds Pressure
The U.S. Commerce Department reported June retail sales rose just 0.2% month-over-month, the smallest gain in five months. More critically, clothing and accessories store sales plunged 9% month-over-month, even as overall spending grew 6.7% year-over-year. This divergence shows consumers prioritizing essentials like gasoline and food over apparel, which bodes poorly for textile demand in the second half of the year.
China's Reserve Auction: A Policy Wildcard
China is set to launch its national reserve cotton auction next Monday, releasing state stockpiles into the domestic market. This move could reduce Chinese import demand in the near term, further pressuring U.S. cotton export prospects. The Cotlook A Index currently stands at 90.65 cents per pound, a premium over ICE futures that may narrow once the auction begins.
Cross-Commodity and Currency Effects
CBOT wheat futures remain elevated due to Black Sea geopolitical tensions, providing some support to the broader agricultural complex, but cotton is lagging due to its own weak fundamentals. Meanwhile, a strengthening U.S. dollar is adding headwinds to dollar-denominated commodities. ICE data shows deliverable cotton stocks at 98,838 bales as of July 15, down slightly but still elevated.