U.S. Cotton Exports Hit Marketing-Year Low, Futures Fall 3.6% Weekly

The latest U.S. cotton export data is sending a clear signal: the recovery in global textile demand is moving much slower than the market had anticipated.

The USDA weekly export sales report for the week ending July 9 showed net sales of current marketing-year U.S. upland cotton at just 34,360 bales, the lowest level for the entire marketing year. This represents a 48% decline from the previous week and a 63% drop from the prior four-week average. Notably, net sales to China were negative by 32 bales, indicating cancellations or order switches.

The Reality Behind the Export Cliff

A figure of 34,360 bales is almost unimaginable in any normal sales year. Industry data shows the average net sales for the same period over the past five years was around 120,000 bales. The current level is less than 30% of that historical average. More concerning is that this low point is not occurring during a seasonal lull—early July is typically a critical window for major buyers like China, Bangladesh, and Vietnam to secure supply for second-half orders.

For buyers, this means two things: first, downstream inventory digestion is still slow, with brands and retailers showing little appetite for restocking; second, international cotton prices in the 78-80 cents/lb range have not yet attracted sufficient buying support, giving buyers greater bargaining power. The price spread between domestic Chinese cotton and imported cotton has been narrowing, eroding the cost advantage of domestic supply.

Speculative Withdrawal and Cost-Side Dynamics

Alongside the weak export data, speculative positions are rapidly exiting. The ICE December cotton futures contract fell 0.67 cents to settle at 78.63 cents/lb on July 17, with a weekly loss of 3.6%. Market participants attribute the decline not only to fundamental weakness but also to profit-taking by traders ahead of the weekend.

However, the cost side is not without support. International oil prices surged more than 4% on the same day, hitting a one-month high. Escalating military tensions between the U.S. and Iran in the Gulf region, restricted access through the Strait of Hormuz, and potential disruption to Red Sea shipping lanes are all raising the cost of global energy transport. For a commodity as transport-intensive as cotton, higher crude prices will gradually feed into freight rates and the price of synthetic fiber alternatives.

A modest strengthening of the U.S. dollar index on July 17 added further pressure. A stronger dollar makes dollar-denominated commodities like cotton more expensive for overseas buyers, curbing demand from non-dollar economies.

Weather and Inventory as Short-Term Variables

With demand unlikely to improve in the near term, supply-side disruptions remain one of the few bullish factors. Weather forecasts for major U.S. cotton-growing regions show some rainfall, though amounts are modest, adding uncertainty to boll development. Other growing areas face challenges such as drought or pest pressure, which may be reflected in future USDA crop progress reports.

ICE deliverable stocks of No. 2 cotton futures stood at 98,838 bales, unchanged from the previous session, indicating sluggish spot market activity. The Cotlook A index fell 225 points to 88.40 cents/lb, tracking the futures decline closely.

Practical Recommendations

For Buyers - Current international cotton prices are at a cyclical low, but export data suggests demand has not yet bottomed. Adopt a phased price-locking strategy rather than committing to large single orders. - Monitor the domestic-international price spread closely. If the spread continues to narrow, the cost advantage of domestic Chinese cotton will diminish, making it prudent to increase the proportion of imported cotton. - Geopolitical risks are driving up shipping costs. Lock in forward cargo space early and negotiate flexible terms for switching between FOB and CNF pricing with suppliers.

For Foreign Trade Companies - With U.S. cotton exports hitting a marketing-year low, international cotton prices lack near-term upside momentum. Shorten the validity period of quotations to hedge against fluctuations in exchange rates and raw material costs. - Closely track import license issuance and quota usage in key buying countries such as China, Vietnam, and Bangladesh. These policy variables will directly influence order flows in the second half of the year. - Rising oil prices will push up synthetic fiber costs, potentially widening the cotton-polyester price gap. Build a cost-adjustment buffer into fabric quotations to account for potential increases in synthetic fiber costs.