ICE cotton futures closed lower on Friday, July 17, with the most-active December contract settling at 78.63 cents per pound, down 0.67 cent or 0.84% on the day. For the week, the contract posted a cumulative loss of 3.6%, marking the most significant weekly decline in the past two months, driven by a combination of weak demand fundamentals and fund positioning.
Export Sales Hit Marketing-Year Low
The primary catalyst was the USDA’s weekly export sales report for the week ending July 9. Current marketing-year net sales of U.S. upland cotton reached only 34,360 bales, the lowest weekly total of the 2025/26 season. This figure represents a 48% drop from the previous week and a 63% decline from the prior four-week average. Notably, net sales to China turned negative, with a reduction of 32 bales, signaling that the world’s largest cotton importer is stepping back at current price levels.
Total export shipments for the current year were 214,893 bales, down 7% week-on-week, with shipments to China accounting for just 3,348 bales. These numbers raise questions about the sustainability of recent price gains and suggest that end-users are adopting a wait-and-see approach.
Speculative Liquidation Adds Pressure
Market participants attributed Friday’s decline largely to pre-weekend profit-taking and speculative liquidation, rather than any single bearish headline. After the previous rally, long-positioned funds chose to cash out ahead of the weekend, amplifying the downside move. The U.S. dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers and further dampening demand prospects.
Mixed External Signals
While crude oil surged over 4% on Friday to a one-month high amid heightened geopolitical tensions in the Middle East, the energy rally failed to spill over into the cotton market. Meanwhile, light rainfall was forecast for some U.S. cotton-producing areas, partially easing drought concerns and reducing the weather premium embedded in prices. ICE-certified cotton stocks remained flat at 98,838 bales.
Implications for the Supply Chain
The Cotlook A index fell 225 points to 88.40 cents per pound, confirming the bearish tone in the physical market. For Chinese textile mills, lower import cotton costs could help narrow the price gap between domestic and foreign cotton. However, the weak export data also signals that downstream demand recovery—particularly for apparel exports to the U.S. and Europe—may be slower than expected.
From a technical perspective, the 78-cent level may offer near-term support, but if the next USDA report confirms continued weakness, a test of 75 cents is possible.