At 78.63 cents per pound, the settlement price of the ICE December cotton futures contract on Friday marked a single-day drop of 0.84% and a weekly decline of 3.6%. For China's cotton textile chain, this number signals a phase of weak overseas demand.
Export data hits marketing-year low
The USDA weekly export sales report for the week ending July 9 showed that current-crop US cotton net sales were only 34,360 bales, the lowest level of the 2025/26 marketing year. This represents a 48% drop from the previous week and a 63% decline from the four-week average. Notably, net sales to China were negative -32 bales, indicating some cancellations or switches. New-crop forward sales were also weak at just 4,075 bales. Shipments totaled 214,893 bales, down 7% week-on-week and 14% below the four-week average.
These figures point to a clear reality: overseas spinners' willingness to buy high-priced cotton is fading fast. Instead of bargain-hunting as prices fell, buyers chose to wait or even default, suggesting that the pressure from weak apparel consumption has fully transmitted upstream.
Fund sentiment and macro factors align
The price drop was not driven by a single bearish factor. A StoneX risk management consultant noted that Friday's decline was largely due to speculative long liquidation and profit-taking. Earlier in the week, prices had rallied briefly on weather concerns, but as forecasts showed some rain in key growing areas, the drought premium quickly dissipated.
Meanwhile, the US dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers. Although crude oil rallied over 4% on Middle East tensions, this bullish signal failed to lift cotton prices, highlighting the dominance of weak fundamentals.
Transmission to Chinese textile mills
Lower US cotton prices are a double-edged sword for Chinese mills. In the short term, lower import costs help relieve raw material pressure, especially for mills using 1% tariff quotas. However, the deeper implication is that a falling ICE often accompanies shrinking overseas orders. When Vietnam and Bangladesh reduce US cotton purchases, it usually means their downstream garment export orders are also contracting.
For mills focused on the domestic market, external price swings have a more indirect impact. But for those producing high-count yarns from imported cotton for export to Europe and the US, the risk lies in margin compression between falling raw material costs and falling finished product prices. The current domestic-import cotton spread has narrowed significantly; if ICE continues to weaken, Zhengzhou cotton futures will find it hard to stay firm.
Weather and new-crop outlook
Weather in Texas remains the key variable for the coming weeks. Current forecasts show some rain, but amounts are limited and unlikely to fully alleviate soil moisture deficits. Other growing regions such as Georgia and the Mississippi Delta face their own challenges. With planted acreage already down year-on-year, any further hit to yields could mean final production falls short of expectations, providing a floor for forward prices.
ICE certified stocks stood at 98,838 bales, unchanged from the previous day, indicating no panic selling in the physical market. The price decline is largely a futures-driven event.