U.S. cotton export sales have hit a seasonal low, signaling deepening caution among global buyers. According to the latest USDA weekly export sales report for the week ending July 9, net sales of current-crop upland cotton were just 34,360 bales—down 48% from the previous week and 63% below the four-week average, marking the lowest level of the entire marketing year. Net sales to China turned negative at -32 bales, indicating some order cancellations. New-crop sales were equally weak at only 4,075 bales.
Demand Signals Clearly Weakening
Shipment data painted a similarly bleak picture. Total upland cotton exports for the week were 214,893 bales, down 7% from the prior week and 14% below the four-week average. Shipments to China amounted to just 3,348 bales, a negligible share of the total. These figures clearly show that international textile mills are rapidly scaling back their purchases of U.S. cotton, as downstream destocking pressure feeds upstream to raw material markets.
Historically, June-July is a seasonal lull for cotton demand in the Northern Hemisphere, but such a steep month-on-month decline is still unusual. China, the world's largest cotton consumer and importer, posted negative net sales for the week, implying that domestic textile mills prefer to draw down inventories or source from other origins rather than place new U.S. orders.
Futures and Spot Markets Weaken in Tandem
ICE cotton futures fell sharply following the export data release. The active December contract dropped 3% on Thursday and another 0.84% on Friday, settling at 78.63 cents per pound, for a weekly loss of 3.6%. Market participants noted that in addition to the weak sales data, some speculative funds took profits ahead of the weekend, adding to selling pressure. StoneX risk management advisor Bailey McHenry said Friday's decline was more about trader position-squaring than any single catalyst.
The spot market followed suit. The Cotlook A index fell 225 points to 88.40 cents per pound on July 17. The narrowing futures-spread suggests a lack of physical buying interest at current levels. ICE data showed deliverable stocks at 98,838 bales as of July 16, a high inventory level that further undermines price support.
External Factors Add Uncertainty
On the macro front, a slightly stronger dollar made dollar-denominated cotton more expensive for overseas buyers, objectively curbing non-U.S. purchasing appetite. Meanwhile, international oil prices surged more than 4% due to heightened Middle East geopolitical tensions. While this could raise production costs for synthetic fiber alternatives, its positive impact on cotton prices is limited given the prevailing demand weakness.
Weather-wise, light rainfall is forecast for major U.S. cotton-producing regions. Though insufficient to alleviate all dry areas, it temporarily eases supply concerns. Overall, weak demand remains the core contradiction for cotton prices, while the supply side currently lacks a catalyst for bullish sentiment.
Industry Transmission and Outlook
For Chinese textile mills, the record-low U.S. export sales mean international suppliers will likely further cut offers to stimulate sales, implying more downside for import cotton prices. For spinners relying on imported cotton, this offers a phased restocking opportunity, though they should watch for cost uncertainties from RMB exchange rate fluctuations.
For cotton traders and supply chain intermediaries, current market liquidity is declining and intermediate inventory digestion is slowing. They should control open positions and avoid excessive stockpiling during the price downtrend.