The US cotton export market is experiencing its coldest week of the current marketing year. The USDA's weekly export sales report for the week ending July 9 showed current marketing year upland cotton net sales of only 34,360 bales, halved from the previous week and down more than 60% from the four-week average. This data directly triggered a sell-off in ICE cotton futures, with the December contract falling 3.6% for the week to settle at 78.63 cents per pound.
Export Cliff: The True Face of Demand
The weekly net sales figure of 34,360 bales is the lowest of the 2025/26 marketing year. More alarmingly, net sales to China were negative — a reduction of 32 bales, meaning Chinese buyers not only made no new purchases but were canceling or reselling previous orders. As the world's largest cotton consumer and importer, China's absence is a fatal signal for US cotton exporters.
Shipment data is equally discouraging. Weekly upland cotton shipments totaled 214,893 bales, down 7% week-on-week, with an even larger year-on-year decline. On the inventory side, ICE deliverable stocks remained high at 98,838 bales, indicating ample spot market liquidity and no buyer appetite to stockpile. The Cotlook A Index fell 225 points to 88.40 cents per pound, confirming a bearish spot market.
Speculator Retreat and Macro Headwinds
Beyond demand-side headwinds, capital flight accelerated the price decline. A StoneX risk management consultant noted that Friday's drop was mainly due to speculative traders liquidating positions, not new fundamental news. After a week of gains, profit-taking concentrated ahead of the weekend, creating technical selling pressure.
Meanwhile, the US dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers, further curbing purchasing interest. Although international oil prices surged over 4% on Middle East tensions, the boost to cotton was negligible — the short-term correlation between agricultural commodities and energy is weakening, with capital focusing more on their own supply-demand dynamics.
Weather Premium and Long-Term Game
The market is not entirely without bullish cues. Key US cotton-producing regions — especially West Texas — are facing hot and dry conditions. While weather forecasts show some light rainfall in the near term, the amount is limited and unlikely to significantly alleviate drought stress. Other growing areas are also experiencing some pressure, providing a modest weather premium for deferred contracts.
However, the core contradiction remains demand. China's textile industry is seeing slow recovery in export orders and lackluster domestic consumption. Mills are purchasing raw materials hand-to-mouth, lacking the incentive for large-scale restocking. Until this dynamic changes, cotton prices will find it difficult to sustain an upward trend.