On June 9, ICE cotton futures suffered a triple blow, with the July contract plunging 3.08% to 71.26 cents per pound, hitting an intraday low of 71.08 cents—the lowest since March 27. The active December contract also fell 2.98% to settle at 75.30 cents. This decline was not driven by a single factor but by synchronized pressure from three dimensions: international oil prices, grain markets, and macroeconomic risk aversion.
The Oil-Grain Linkage Effect
Oil prices dropped about 3% to a seven-week low. Geopolitically, Iran and Israel stopped mutual attacks at US President Trump's call, but Trump later claimed Iran shot down a US helicopter in the Strait of Hormuz and threatened retaliation, causing oil to rebound from the day's low but still close lower. As an energy-intensive crop, lower oil prices directly reduce cotton's production cost support while weakening biofuel demand expectations, subsequently affecting substitute crops like soybeans and corn.
Grain markets also weakened. CBOT soybean futures fell on favorable weather in the US Midwest, reinforcing harvest expectations. New-crop December corn edged down 3/4 cent. An analyst at Price Futures Group noted that cotton is taking direction from the grain market—when grain prices are under pressure, cotton loses its comparative advantage, and the room for planting area adjustments shrinks, dragging futures sentiment lower.
Fundamental Data: Mixed but Bearish in the Short Term
The USDA weekly crop progress report showed that as of June 7, US cotton good-to-excellent ratings stood at 53%, up from 49% a year ago. Planting progress reached 77%, also ahead of last year's 75%. This indicates improved new-crop supply prospects, weighing on deferred contracts. Notably, ICE deliverable No. 2 cotton stocks were 257,511 bales, down 4,137 bales from the previous day, suggesting no immediate surplus in the physical market, but futures are more focused on expectations than the present.
Brazil's foreign trade secretariat reported that in the first week of June, cotton exports totaled 64,165.64 tonnes, with an average daily volume of 16,041.41 tonnes—a staggering 142% increase over the June 2025 daily average of 6,640.90 tonnes. Brazilian cotton continues to grab market share from US cotton on price competitiveness, a trend that will amplify in the 2025/26 season. For Chinese buyers, increased Brazilian arrivals mean the import cost curve may continue to shift lower.
Macro and Fund Flows: Risk-Off Dominates
US stock markets fell on Tuesday, with the S&P 500 and Nasdaq both declining as the tech rally faded. The Philadelphia Semiconductor Index plunged as much as 8.6% intraday. Trump's comments on the helicopter incident added geopolitical uncertainty, prompting capital to flee risk assets. Although the US dollar index fell—theoretically bullish for dollar-denominated cotton—the risk-off logic weighed on commodities broadly, and cotton failed to gain support from the exchange rate.
Market attention has shifted to Thursday's USDA monthly supply-demand report. The May report projected a slight increase in global cotton stocks-to-use ratio for 2025/26. If the June report further raises US production or lowers export estimates, it could trigger another round of selling.
Industry Impact and Price Outlook
From an industry perspective, current prices partly reflect supply looseness but have not yet fully priced in Brazil's export surge and macro risks. The 71-cent level for the July contract is a key short-term support; a break below could target 70 cents. The December contract is oscillating around 75 cents; if the USDA report is bearish, the downside target is 73 cents.
For textile mills, the window for lower raw material costs is opening. However, note that the price transmission from futures to physical markets lags by one to two weeks, and the spread between high and low grades may widen—high-grade cotton retains a premium due to structural shortages, while low-grade faces greater destocking pressure.