U.S. cotton export data deteriorated sharply, and speculative capital exited en masse, sending ICE cotton futures down 3.6% for the week ending July 17. The most-active December contract settled at 78.63 cents per pound, breaking below the psychologically important 80-cent mark and prompting a reassessment of global cotton demand.
Export Collapse and Fund Retreat
The USDA's weekly export sales report was the direct trigger. For the week ended July 9, current marketing-year upland cotton net sales were only 34,360 bales, a marketing-year low and down 48% from the previous week and 63% below the four-week average. Notably, net sales to China turned negative at minus 32 bales. Next marketing-year sales were just 4,075 bales, far below expectations. Shipments also weakened, totaling 214,893 bales, down 7% week-on-week and 14% below the four-week average, with only 3,348 bales shipped to China.
StoneX risk management consultant Bailey McHenry noted that Friday's decline was not triggered by any single news event but was closely tied to speculative traders' liquidation operations. Prices had already fallen 3% on Thursday after the export report, and long positions were clearly shaken. Profit-taking and risk-off hedging converged ahead of the weekend. ICE deliverable stocks remained unchanged at 98,838 bales, indicating no new delivery pressure from the physical side, meaning the sell-off was primarily financial.
Macro and Weather Crosscurrents
External markets showed clear divergence this week. International oil prices surged over 4% to a one-month high due to escalating U.S.-Iran tensions in the Gulf region, with the Strait of Hormuz already restricted and the Red Sea facing potential closure. Theoretically, higher oil prices raise the cost of synthetic fiber substitutes and provide indirect support for cotton, but cotton failed to follow, indicating that weak demand has overwhelmed cost-pass-through logic.
The U.S. dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers and further suppressing already sluggish purchasing interest. Meanwhile, weather forecasts called for some rainfall in major U.S. cotton-growing regions, albeit light, which could reduce the weather premium during the critical growth period.
Industry Impact: Procurement Windows and Hedging
For Chinese textile mills, ICE cotton falling below 79 cents means lower import costs, but the inverted domestic-international price spread remains. The Cotlook A index dropped 225 points to 88.40 cents per pound on July 17, confirming that international physical prices are also declining. Zhengzhou cotton futures have been relatively resilient, and as the spread narrows, imported cotton's cost advantage is slowly recovering.
From a supply chain perspective, persistently weak export data reflects sluggish overseas apparel demand. U.S. retailers are destocking slowly, and brands are cautious in procurement. This pressure is transmitting upstream from yarn and fabric to cotton growers. Chinese textile companies should be alert to the combined risk of shrinking volumes and falling prices in export orders.