Crude Oil and Grains Pressure ICE Cotton to Near Three-Month Low

Crude oil and grain markets both weakened simultaneously, dragging ICE cotton futures to a near three-month low. On June 9, the July contract settled at 71.26 cents per pound, down 3.08% on the day, hitting an intraday low of 71.08 cents—the lowest since March 27. The active December contract also fell 2.98% to close at 75.30 cents. This decline was not driven by fundamental changes in cotton itself, but by systemic risk across the agricultural commodity complex.

External Market Contagion Oil prices dropped about 3% to a seven-week low after Iran and Israel agreed to cease mutual attacks following a call from U.S. President Donald Trump, easing concerns over Middle East supply disruptions. As a cost anchor for commodities, lower crude directly reduced the cost expectations for cotton planting. Meanwhile, CBOT soybean futures fell due to favorable weather in the U.S. Midwest, and new-crop corn contracts edged lower, putting overall pressure on the grain complex. An analyst at Price Futures Group noted that cotton is taking direction from grain markets—when corn and soybean prices decline, expectations of farmers adjusting planting structures indirectly weigh on cotton prices.

Supply-Side Data Intensifies Bearish Sentiment Data from Brazil's Secretariat of Foreign Trade (Secex) showed that in the first week of June, Brazil exported 64,165.64 tons of cotton, with an average daily volume of 16,041.41 tons—a 142% surge compared to the daily average in June last year. As the world's second-largest cotton exporter, Brazil's accelerated shipments mean more readily available supply is accumulating in the international market. Separately, the USDA's weekly crop progress report indicated that as of June 7, U.S. cotton was rated 53% good to excellent, up from 49% a year ago; planting progress stood at 77%, also ahead of last year's 75%. Improved growing conditions, combined with stable planted acreage, further confirmed expectations of a looser supply balance for the new season.

Inventory and Currency Factors ICE deliverable No. 2 cotton futures stocks stood at 257,511 bales as of June 8, down slightly from 261,648 bales the previous day, but still at elevated levels that pressure nearby contracts. The U.S. dollar index fell on the day, which theoretically supports dollar-denominated cotton, but this positive factor was completely overwhelmed by the broader selling wave. Both the S&P 500 and Nasdaq indices closed lower as the tech rally fizzled, reflecting a contraction in risk appetite. Capital flowed out of commodity markets, further accelerating the decline in cotton prices.

Key Event Window Approaches The market is now focused on the USDA's monthly supply-demand report due Thursday. Against the backdrop of surging Brazilian exports and favorable U.S. cotton conditions, the market widely expects the report to raise its global ending stocks estimate. If the data confirms this, cotton prices may test the 70-cent level; even if the report is neutral to slightly bullish, the upside is limited until crude and grains stabilize. For textile mills, current prices are approaching the psychological buying level for some spinners, but caution is warranted due to potential volatility around the report release.

Practical Recommendations ### For Buyers - Current prices are near a three-month low, but the July contract is approaching expiration with declining liquidity—priority should be given to locking in forward prices using the December contract. - If the USDA report raises stocks, consider building positions in the 70-71 cent range in batches; if the report is unexpectedly bullish, wait for a rebound above 75 cents before reassessing.

For Exporters - Brazil's export surge suggests international cotton prices will likely remain under pressure in the second half of the year. Export quotations should leave more room for price adjustments to avoid locking in excessive basis in long-term contracts. - Monitor ICE speculative net long positions; if they continue to decline, consider shortening the duration of forward contracts to mitigate performance risks from rapid price fluctuations.