Cotton Prices See Fifth Consecutive Weekly Decline: Signals of Supply-Demand Rebalance and Procurement Window for Industry

Cotton futures saw a modest rebound on June 12, with the July contract closing at 72.94 cents/lb and the most-active December contract at 76.42 cents/lb. However, this failed to reverse the trend of a fifth consecutive weekly decline, leaving the market in a sensitive tug-of-war between bulls and bears.

Background

The core drivers of the recent price decline are twofold: persistent pressure from a stronger US dollar on the macro level, and adjustments in supply-demand expectations on the fundamental side. The rebound on June 12 was mainly fueled by a weaker US dollar that day and bullish signals from the latest USDA supply-demand report, which lowered 2026/27 US and global ending stocks while raising global consumption estimates.

Technically, the market saw short-covering after extended oversold conditions. Traders noted that the 72-75 cents/lb range could become a short-term oscillation platform, but upward momentum remains insufficient. Meanwhile, oil prices fell to near two-month lows, reducing the production cost of polyester fiber and creating substitution pressure on cotton.

Industry Impact

For the textile supply chain, the current price trajectory implies several key judgments. First, the "scissors gap" between lower global inventories and higher consumption suggests fundamentals are moving toward tightening, but this has not yet been fully priced in. Second, five consecutive weekly declines indicate bearish sentiment still dominates, and there is no sustained catalyst for a price rally in the short term.

For buyers, the 72-75 cent range is attractive—close to the lows of the past two years. If subsequent USDA reports continue to confirm inventory tightening, current prices could represent a cyclical bottom. But risks remain: any reversal in Middle East geopolitical easing could strengthen the dollar again, weighing on cotton; further oil price declines would erode cotton's competitiveness against synthetic alternatives.

It is also worth noting that corn and soybean futures indirectly affect cotton markets. Corn strengthened on short-covering, while soybeans hovered near four-year lows, with the overall softness in agricultural products limiting cotton's rebound potential.

Practical Recommendations

For Procurement Departments - The current 72-75 cent range can be viewed as a window for phased purchasing; consider placing orders in 3-4 tranches based on monthly usage to avoid concentrated risk. - Closely monitor monthly USDA supply-demand reports and weekly export sales data; if export sales improve for two consecutive weeks, accelerate procurement. - Be wary of dollar trends: a substantive breakthrough in Middle East peace talks could lead to sustained dollar weakness, increasing upside risk for cotton prices.

For Foreign Trade Companies - When quoting long-term orders, incorporate cotton price volatility into cost calculations, using ICE futures hedging or floating price clauses with clients. - Monitor polyester price changes: if crude oil continues to decline, the cost advantage of synthetic fibers will expand, potentially affecting the export competitiveness of cotton products. - Use the current low cotton price window to sign long-term supply agreements with upstream spinners to lock in raw material costs.