The ICE December cotton futures contract settled at 78.63 cents per pound on July 17, logging a weekly loss of 3.6%. While technical profit-taking played a role, the real concern lies beneath the surface: US cotton export sales have hit their lowest level of the marketing year.
Export Data: Annual Low
According to the USDA weekly export sales report released July 17, net sales of upland cotton for the 2025/26 marketing year during the week ending July 9 amounted to just 34,360 bales—down 48% from the previous week and 63% below the four-week average. This is the lowest weekly total of the current marketing year. Notably, net sales to China were negative 32 bales, meaning Chinese buyers reduced their commitments rather than adding new purchases.
Forward sales for the 2026/27 season were also weak, totaling only 4,075 bales. Shipments for the week reached 214,893 bales, down 7% week-on-week and 14% below the four-week average. Shipments to China were just 3,348 bales. Collectively, these figures signal a clear deceleration in overseas demand, particularly from China.
Price Pressure: Speculative Liquidation and a Stronger Dollar
StoneX risk management consultant Bailey McHenry attributed Friday's decline mainly to speculative traders squaring positions ahead of the weekend, calling it a continuation of the previous day's weakness rather than a fresh negative catalyst. ICE deliverable stocks stood at 98,838 bales as of July 16, unchanged from the prior session, suggesting no abrupt shift in physical fundamentals.
Meanwhile, the US dollar index edged higher, making dollar-denominated cotton more expensive for foreign buyers. For importers already hesitating, currency headwinds further dampened purchasing appetite.
Cross-Market Dynamics: Surging Oil vs. Cotton
While cotton struggled, crude oil surged more than 4% on July 17 to a one-month high, driven by escalating US-Iran strikes in the Gulf region and potential closures of the Strait of Hormuz and Red Sea shipping lanes. Higher oil costs theoretically support cotton via input inflation, but in practice, speculative funds preferred to lock in profits rather than bet on pass-through effects.
On the weather front, McHenry noted scattered rains were forecast for cotton-growing areas, though amounts were modest. Other growing regions face some challenges, but weather has not yet become a dominant price driver.
Cash Market Weakens
The physical market followed futures lower. The Cotlook A Index fell 225 points to 88.40 cents per pound on July 17, narrowing the premium over futures and reflecting tepid mill buying interest.
For textile mills, the current 78-79 cent range represents a delicate balance. A break below 78 cents could trigger more fix-price purchases, but continued weak export data would intensify downside pressure.