U.S. cotton export data turned sharply cold, dragging the ICE cotton futures main contract down 3.6% for the week ending July 17, closing at 78.63 cents per pound. Prices had already slumped 3% the previous day (July 16), and Friday's further decline was widely interpreted by the market as concentrated speculative long liquidation ahead of the weekend. This sell-off was not driven by a single factor but by the convergence of weak exports, capital outflows, and macro currency pressure.
Export Collapse and Demand Signals
The USDA weekly export sales report released on July 17 became the week's most critical bearish catalyst. For the week ending July 9, net sales of U.S. upland cotton for the current marketing year were only 34,360 bales, the lowest single-week tally of the 2025/26 marketing year. This figure plunged 48% from the previous week and a steep 63% below the prior four-week average. Notably, Chinese buyers not only refrained from new purchases but also recorded a net reduction of 32 bales, a rare occurrence.
Forward sales for the 2026/27 marketing year were equally weak, with net sales of just 4,075 bales. Export shipments also softened, totaling 214,893 bales, down 7% from the previous week and 14% below the prior four-week average, with shipments to China amounting to only 3,348 bales. These data imply that the restocking appetite of major overseas buyers—especially China—is rapidly cooling, and spinners' tolerance for high cotton prices is clearly declining.
Speculative Exit and External Market Spillover
StoneX risk management advisor Bailey McHenry noted that Friday's decline was more related to speculative traders' position squaring than to any new fundamental bearish news. After Thursday's sharp 3% drop, many long positions were either profit-taking or stop-loss ahead of the weekend, exacerbating the day's downward pressure. ICE data showed that deliverable No. 2 cotton futures inventory stood at 98,838 bales as of July 16, indicating no significant easing of stock pressure.
Meanwhile, the U.S. dollar index edged higher during the week, making dollar-denominated cotton more expensive for overseas buyers, further curbing purchasing intentions. On the external front, although international oil prices surged over 4% on Friday (driven by escalating U.S.-Iran conflicts in the Gulf region and potential closure risks in the Red Sea shipping lane), this energy price spike did not provide the usual support for cotton prices. This suggests that the core contradiction in the cotton market has shifted from the supply side to the demand side.
Weather in Growing Regions and Outlook
The market is not entirely without bullish factors. Weather forecasts indicate some rainfall in parts of U.S. cotton-growing areas, though not heavy, at least alleviating concerns of extreme drought. However, other planting regions still face challenges, and weather uncertainty remains an important variable in the coming weeks.
From an industrial perspective, the current weakness in U.S. cotton exports has a certain seasonal characteristic—July and August typically mark the transition between old and new crop years, with buyers tending to wait for the new crop. However, a 48% week-on-week decline and the absolute figure hitting a marketing-year low go beyond normal seasonal adjustments. This reflects insufficient recovery in global textile end-consumption and cautious inventory management by major importing countries, especially China.