US cotton export sales hit a marketing-year low, combined with speculative profit-taking ahead of the weekend, pushed ICE cotton futures down 3.6% for the week, with the December contract settling at 78.63 cents per pound. This decline is not an isolated technical correction but a re-pricing between fundamental supply-demand dynamics and macro uncertainties.
Export Cliff: The Real Chilling Demand
The USDA weekly export sales report for the week ending July 9 showed net sales of current-crop US upland cotton at only 34,360 bales, down 48% from the previous week and 63% below the four-week average. Net sales to China turned negative at minus 32 bales, indicating some cancellations or rollovers. This marks the lowest point of the marketing year and signals a rapid contraction in foreign buyers' purchasing appetite.
Shipments also weakened. US upland cotton exports reached 214,893 bales, down 7% week-over-week and 14% below the four-week average. Shipments to China were a mere 3,348 bales, historically low. This suggests not only fewer new orders but also slower execution of existing contracts. For Asian spinners relying on US cotton, this is both a buying opportunity and an inventory management warning.
Speculative Pullback and External Market Resonance
A StoneX risk management advisor noted that Friday's decline was mainly driven by speculative traders squaring positions rather than a single news event. The previous week's rally was fueled by weather speculation and short covering, but lacked sustained demand support. When the export data disappointed, longs chose to lock in profits before the weekend, accelerating the price drop.
External markets offered no cushion. The US dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers. International oil prices surged over 4% to a one-month high due to heightened geopolitical tensions in the Gulf region. While higher oil prices don't directly impact cotton, they raise production costs for synthetic fiber alternatives, providing indirect support—but this transmission takes time and cannot offset immediate demand weakness.
Supply-Side Stability: Weather and Deliverable Stocks
Weather forecasts show some light rainfall in cotton-producing areas, but no extreme drought or flood threats. This means new-crop US cotton production expectations remain largely unchanged. ICE data showed deliverable stocks at 98,838 bales as of July 16, unchanged from the previous day, indicating neutral inventory pressure.
From a supply chain perspective, the core contradiction in cotton prices is that actual demand contraction is outpacing any expected supply reduction. For major importers like China, Vietnam, and Bangladesh, lower US cotton prices may mean reduced procurement costs, but order sustainability remains the fundamental issue.