U.S. cotton export sales hit a marketing-year low, combined with concentrated speculative capital exits, drove the ICE cotton futures December contract to a weekly decline of 3.6% for the week ending July 17. This marks the largest single-week correction since mid-June, shifting market sentiment from earlier optimism to caution.
Export Data Hits Annual Low, Demand Side Issues Warning
The USDA's weekly export sales report for the week ending July 9 showed net U.S. cotton sales of only 34,360 bales, the lowest of the current marketing year. This figure plunged 48% from the previous week and 63% from the four-week average. More concerning, net sales to China turned negative, with a reduction of 32 bales, indicating some order cancellations.
Shipment data was also disappointing. Export shipments totaled 214,893 bales, down 7% week-on-week and 14% year-on-year. Shipments to China were only 3,348 bales, remaining at low levels. The significant weakening of export momentum directly undermined the demand logic that had previously supported cotton prices. For buyers, this suggests overseas acceptance of current price levels is declining, potentially putting more destocking pressure upstream.
Speculative Profits Taken, External Markets Send Mixed Signals
Another pressure came from within the futures market. A StoneX risk management advisor noted that Friday's decline was mainly driven by speculative traders closing long positions, not by any new bearish news. After several weeks of price increases, many floating profits had accumulated, and the weak export data acted as a catalyst for profit-taking.
External market signals were mixed. Oil prices surged over 4% to a one-month high due to escalating Middle East geopolitical tensions, but this failed to lift cotton. The U.S. dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers, further dampening demand. ICE data showed deliverable cotton stocks at 98,838 bales as of July 16, with no abnormal fluctuations, indicating current pressure is from demand rather than supply.
Weather and Buying Pace Become Key Variables
Market attention is shifting to U.S. growing region weather. Forecasts show light rainfall in some cotton areas, which, though modest, could erode the weather premium after earlier drought concerns. Other regions face different challenges, with both drought and excessive moisture present, keeping production uncertainty alive.
The spot market weakened in tandem. The Cotlook A index fell 225 points to 88.40 cents/lb on July 17, reflecting thin international physical trading and a strong wait-and-see attitude among buyers. For domestic textile mills, the correction in foreign cotton prices may offer periodic replenishment opportunities, but if export data remains weak, prices could fall further.