ICE cotton futures continued their downward trend on June 10, with the July contract hitting a low of 71.01 cents per pound, the lowest since April 1, before settling down 0.22% at 71.10 cents. The December contract closed flat at 75.30 cents but also touched a low not seen since April 9. While the declines were limited, the market signals warrant caution across the textile supply chain: cotton is in oversold territory, but the rebound momentum remains fragile.
Oversold Conditions and External Support
Technically, cotton has been deeply oversold for several days. A Georgia-based cotton broker noted that short-covering emerged, which helped cap losses. At the same time, external markets provided support: Chicago wheat and corn futures rebounded from multi-month lows, and crude oil rose nearly $2 per barrel amid US-Iran tensions, making synthetic fibers more expensive and indirectly boosting cotton demand expectations.
On the macro front, the US dollar index edged lower after the May CPI rose 4.2% year-on-year, in line with economists' forecasts, easing concerns about an imminent Fed rate hike. However, equity markets fell, with the S&P 500 losing over 1%, reflecting cautious risk appetite.
Supply/Demand Report and Export Data in Focus
The market is awaiting the USDA's World Agricultural Supply and Demand Estimates report due Friday and the weekly export sales report due Thursday. These reports will provide the latest guidance on cotton fundamentals. Industry participants believe cotton has passed its seasonal price peak, and any near-term rebound is unlikely to reverse the medium-term bearish trend. If the reports do not deliver upside surprises, prices may continue to consolidate at low levels.
For textile mills, this means the procurement window may extend. Current futures prices already reflect some bearish expectations. Strong export data or a downward revision in production estimates could trigger a short-term rally; conversely, bearish data could drive prices lower.
Spot Index Weakens in Tandem
On the spot side, the Cotlook A index fell 225 points to 83.65 cents per pound on June 10, echoing the futures decline. The accelerated drop in spot prices reflects sluggish buying interest, with mills mostly on the sidelines, digesting existing inventories.
This trend has been evident in recent weeks for imported cotton. Chinese textile mills have slowed purchasing, leading to accumulating stocks at bonded ports. If futures remain low, spot prices may follow suit, potentially creating attractive pricing opportunities.