ICE December cotton futures lost 3.6% last week, closing at 78.63 cents per pound, dragged down by export data that hit a marketing-year low. This decline is not an isolated technical correction but the combined result of weakening global cotton demand and geopolitical cost transmission. For mills and traders relying on US cotton, the current price volatility signals a fundamental shift in procurement logic.
Export Data Reveal Real Demand Gap
The USDA weekly export sales report for the week ending July 9 showed net upland cotton sales of only 34,360 running bales for the current marketing year — the lowest of the season, down 48% from the previous week and 63% below the prior four-week average. More notably, net sales to China were -32 bales, indicating order cancellations or returns. Shipments totaled 214,893 bales, down 7% week-on-week, with only 3,348 bales destined for China.
These numbers reflect slowing end-demand in major consumption markets, especially China. As the world's largest cotton importer, China's mill operating rates, greige fabric inventories, and garment export orders directly determine US cotton export sentiment. A negative net sale to China suggests that some Chinese buyers are canceling earlier high-priced contracts to avoid inventory depreciation. This is not an isolated case but a continuation of the global textile supply chain's destocking cycle.
Dual Squeeze from Costs and Currency
While demand side weakens, cotton buyers face two cost-side pressures. First, international crude oil surged over 4% last week to a one-month high, driven by escalating Middle East tensions — clashes between Iran and US forces in the Gulf and a potential Red Sea channel closure, with Strait of Hormuz traffic already restricted. Higher oil prices directly raise production costs for synthetic fibers like polyester and viscose, altering the cotton-synthetic price ratio. Cotton is becoming relatively more attractive, but orders won't return immediately as garment buyers remain cautious.
Second, the US dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers. For spinners in India, Pakistan, and Bangladesh, a stronger dollar means higher local-currency costs for imported cotton, further suppressing buying appetite. This exchange rate effect typically takes 2-4 weeks to show in shipment data, so US cotton export figures are likely to remain under pressure in the coming weeks.
Inventory Strategies Diverge Across Industrial Clusters
Feedback from China's major cotton textile clusters reveals clear divergence in inventory strategies. In Xinjiang, ginners are holding firm on prices due to target price subsidies, but inland mills have limited appetite for high-priced cotton and are buying hand-to-mouth. Small and medium mills in Shandong, Henan, and Jiangsu have compressed raw material inventories to 15-20 days, far below the historical 30-45 days. In export-oriented weaving clusters like Foshan (Guangdong) and Lanxi (Zhejiang), order visibility is only about one month, making buyers extremely cautious about forward price locking.
The ICE futures curve confirms this view: the spread between the December and March contracts is under 100 points, indicating no supply tightness expectations, only pessimism about demand recovery. A StoneX risk management advisor noted that speculative liquidation amplified Friday's decline, and weather forecasts show light rain for cotton regions, but this does not change the supply-demand balance.