US cotton export data turned cold, pushing ICE cotton futures to a weekly loss of 3.6%, with the main December contract settling at 78.63 cents/lb. This marks the largest single-week drop since mid-June and signals a shift from 'expected' to 'realized' weak demand.
Export Cliff: The Truth Behind Marketing-Year Low
The USDA's latest weekly export sales report showed net sales of upland cotton for the current marketing year at just 34,360 bales for the week ending July 9, the lowest level of the season, down 48% from the previous week and 63% below the prior four-week average. Net sales to China turned negative at -32 bales, indicating cancellations or contract swaps. Forward sales for the 2026/27 season were only 4,075 bales, well below market expectations.
Shipment data also disappointed: total shipments of 214,893 bales were down 7% week-over-week and 14% year-over-year, with only 3,348 bales destined for China. Slower shipments suggest weaker willingness among overseas buyers to take delivery, pushing inventory pressure back to merchants and growers.
A StoneX risk management advisor noted that Friday's decline was more about speculative liquidation than a single news catalyst. Combined with weak export data, this created a dual pressure of fundamental bearishness and capital withdrawal.
External Market Disturbances: Oil and FX Squeeze
While cotton prices were under their own pressure, external markets offered no support. The US dollar index edged higher, making dollar-denominated cotton more expensive for overseas buyers, further curbing purchases from major importers like China, Vietnam, and Bangladesh.
Although international crude oil prices rose over 4% due to geopolitical risks in the Strait of Hormuz and Red Sea shipping lanes, this bullish signal did not spill over into cotton. The transmission mechanism—via higher costs for polyester staple fiber, a substitute—takes 2-4 weeks, and current inventory levels in the cotton-spinning chain remain high, blunting substitution effects.
Additionally, weather forecasts for US cotton-growing regions showed some rainfall, albeit light. Any moisture relief during the critical growth period could temper earlier drought-related production concerns, reducing the weather premium on prices.
Industry Impact: Procurement Windows and Inventory Management
For Chinese textile mills, with ICE cotton futures now below 80 cents/lb and the Cotlook A index dropping to 88.40 cents/lb, imported cotton costs have entered a relatively low range. However, weak export data suggests overseas demand recovery remains uncertain, so chasing lows for large-scale replenishment is not advisable.
Notably, ICE-certified stocks remain high at 98,838 bales, indicating ample deliverable supply and real pressure. Combined with continued speculative long liquidation, futures prices may test support at 75-77 cents/lb in the near term.
For spinners, the spread between cotton and yarn prices continues to widen, with yarn destocking pressure unabated. If US cotton exports do not improve significantly in the next 2-3 weeks, domestic cotton prices may follow the external market lower, dragging the entire chain's price center down.