Response of U.S. Cotton Export Sales to NY Futures Price (Scroll Down for More Discussion)
The red line shows daily settlement of nearby ICE cotton futures, in cents per pound. The blue plateaus reflect weekly net export sales for the 2020/21 marketing year, in thousands of running bales. The graph generally shows the expected demand response to fluctuating prices for the 2020 crop. Generally, as U.S. prices fluctuate higher, export sales (“quantity demanded”) fluctuate lower. As U.S. cotton becomes cheaper, more of it is typically sold, although sometimes mills will wait during downtrends to fix prices as expected lower levels. As cotton becomes more expensive, mills may buy some to cover their needs, and then sit on their hands again for a reversal (or switch to competing suppliers).
During 2020 the buying pattern of U.S. cotton has been dominated by China. This is thought to be state traders buying cotton for the Chinese strategic reserve. So it is not so much commercial demand — rather, it is more of a policy driven thing. However, there is also the emerging issue of how China will respond to international sanctions banning cotton exports from Xinjiang Province. The most bullish version of this emerging issue is that Chinese manufacturers textile mills that ordinarily export yarn, cloth, and apparel might import more foreign cotton. if that happens, it would be indicated in the chart above with large, weekly new export sales dominated by China (e.g., as in the week ending September 10).