78.63 cents per pound—the December ICE cotton contract breached the psychologically important 80-cent level on July 17, closing the week with a 3.6% loss. Behind the decline lies a weekly export sales report that hit a marketing-year low. With Chinese buyers nearly absent from the U.S. upland cotton market and speculative funds liquidating positions ahead of the weekend, the cotton market is experiencing a synchronized cooling on both the supply and demand sides.
Export Cliff: A Warning Signal at the Marketing-Year Low
The USDA's weekly export sales data released on July 17 painted a grim picture: for the week ending July 9, net sales of current-crop U.S. upland cotton totaled just 34,360 running bales—the lowest of the marketing year. This represented a 48% decline from the previous week and a 63% drop from the four-week average. Notably, net sales to China turned negative, with a reduction of 32 bales. This marks the weakest Chinese participation since the marketing year began last September.
Shipment data also deteriorated. Export shipments for the week reached 214,893 bales, down 7% week-on-week and 14% below the four-week average. Shipments to China totaled a negligible 3,348 bales. Forward sales for the next crop year were only 4,075 bales, indicating that the price decline has not yet stimulated significant distant-month buying.
StoneX risk management consultant Bailey McHenry commented that Friday's decline was more related to speculative position-squaring than to any specific bearish news. This suggests that market sentiment has shifted from bullish to cautious, with capital exiting the market.
Below 80 Cents: The Battle Between Cost Support and Demand Pressure
The ICE December contract had already fallen 3% on Thursday before slipping another 0.84% on Friday to settle at 78.63 cents. The breach of the 80-cent level—a key psychological and technical threshold—signals a fundamental shift in the market's assessment of supply-demand balance.
On the supply side, weather forecasts for U.S. cotton-growing regions indicate some rainfall, though not heavy, which should alleviate earlier drought concerns. Other growing areas face some challenges, leaving overall production expectations uncertain. However, weak demand has clearly outweighed any bullish supply-side factors.
External markets provided only limited support. Crude oil prices surged more than 4% to a one-month high, driven by escalating U.S.-Iran clashes in the Gulf region, restricted passage through the Strait of Hormuz, and the risk of Red Sea shipping lane closures. Yet cotton failed to follow energy prices higher, reflecting low downstream procurement appetite in the textile chain. The U.S. dollar index edged up, further increasing the cost for overseas buyers.
The Cotlook A index fell 225 points to 88.40 cents per pound, tracking futures lower but with a more moderate decline, suggesting that physical holders are still watching rather than panic-selling.
Industry Transmission: From Futures to Mills
Cotton prices falling below 80 cents have clear transmission effects along the textile chain. Lower cotton costs should theoretically improve yarn margins. However, the reality is that final garment orders remain sluggish, downstream fabric mills and dyeing plants are operating at low capacity, and yarn inventory destocking is slower than expected.
China's absence from the market deserves special attention. As the world's largest cotton importer, shifts in China's buying rhythm directly impact international cotton prices. Currently, China's domestic cotton commercial inventories remain high, Xinjiang cotton transportation is normal, and the use of import quotas is slow. This means that even with lower international prices, Chinese mills may delay restocking.
For Southeast Asian textile countries, lower U.S. cotton prices are a short-term positive, but the sustainability of global textile demand contraction must be monitored. Countries like Bangladesh and Vietnam also face declining orders from Europe and the U.S., so cotton procurement remains hand-to-mouth with little speculative hoarding.
ICE-certified cotton stocks stood at 98,838 bales, unchanged from the previous day. This stability suggests no significant delivery pressure, but if prices continue to fall, warehouse warrant increases cannot be ruled out.