At 78.63 cents per pound, the December ICE cotton contract closed the week down 3.6%—a move that on the surface looks like routine profit-taking, but beneath it lies a more structural concern: U.S. export sales have hit a marketing-year low, and speculative longs are rushing for the exit.
Export Data Hits a Wall
The USDA's weekly export sales report, released July 16, showed net sales of current-crop upland cotton at just 34,360 running bales for the week ending July 9—the lowest figure of the 2025/26 marketing year. That represents a 48% drop from the prior week and a 63% plunge from the four-week average. More tellingly, net sales to China turned negative at -32 bales, indicating a rare cancellation of existing orders.
Forward sales for the 2026/27 season were equally weak at only 4,075 bales. Shipments totaled 214,893 bales, down 7% week-over-week and 14% below the four-week average, with just 3,348 bales headed to China. The message is clear: international buyers, especially Chinese mills, are stepping back at current price levels.
Speculative Flush and External Drag
The selloff was not driven by a single fresh bearish headline. Instead, as StoneX risk management advisor noted, Friday's decline was largely tied to speculative traders closing positions ahead of the weekend. The absence of a specific catalyst suggests that market conviction is fracturing.
A slightly firmer U.S. dollar added to the headwind, making dollar-denominated cotton more expensive for overseas buyers. Meanwhile, crude oil surged over 4% on heightened Middle East tensions, but that failed to lift the broader commodity complex—cotton's weakness is rooted in its own supply-demand fundamentals.
Implications for China's Cotton-Textile Chain
For Chinese mills, lower ICE prices theoretically reduce raw material costs. But the negative net sales figure to China signals that domestic buyers remain on the sidelines, unwilling to commit to large volumes even as prices decline. The Xinjiang crop outlook is stable, downstream orders are recovering only slowly, and the domestic spot market is lethargic.
The narrowing of the internal-external price spread has encouraged a hand-to-mouth procurement strategy among spinners. Large inventory builds are unlikely until there is clearer evidence of a demand recovery.
Inventory and Basis Signals
ICE-certified stocks stood at 98,838 bales as of July 16, unchanged from the prior day and near the high end of the year's range. This indicates no immediate physical tightness. The Cotlook A Index fell 225 points to 88.40 cents per pound, in line with futures, keeping the basis at roughly 10 cents. For merchants holding physical cotton, hedging opportunities are narrowing.
Outlook and Tactical Recommendations
The export slump is not an anomaly. Global textile demand remains tepid, and major importers—China, Vietnam, Bangladesh—are all pacing cautiously. U.S. growing conditions are largely benign, with only minor rainfall in some areas. Until export sales show a sustained pickup or weather risk re-emerges, upward momentum will be hard to sustain.