Cotton Prices Fall for Fourth Straight Day Under Dual Pressure from US Dollar and Crude Oil, Textile Procurement Window May Open

International cotton prices are undergoing a sharp correction. The ICE cotton December contract fell for the fourth consecutive session on June 24, closing down 3.14% at 76.26 cents per pound, after touching a half-month low of 76.15 cents during the session. The nearby July contract also dropped 1.66% to 73.96 cents. This pullback has erased over 13% of the value since the mid-May peak above 88 cents.

Macro Pressure from Dollar and Crude Oil

The immediate drivers are macroeconomic. The US dollar index rose for a third straight day, hitting 101.8 on June 24, its highest since May 2025. Rising expectations of Federal Reserve rate hikes and a tech stock selloff fueled safe-haven demand for the greenback. A stronger dollar makes dollar-denominated cotton more expensive for overseas buyers, pressuring demand. Meanwhile, crude oil plunged over $3 per barrel to its lowest since the Iran tensions eased, as more tankers departed the Strait of Hormuz, easing supply concerns. Lower oil prices reduce the production cost of polyester, cotton's main synthetic competitor, further undermining cotton's relative price advantage.

Market Awaits USDA Reports

The market is in a wait-and-see mode ahead of key data releases. The USDA is set to release its planted acreage and quarterly stocks reports on June 30, which will directly shape expectations for the 2025/26 balance sheet. A Kansas-based commodity analyst noted that prices may find some support before June 30 from expectations that post-drought rains will improve new crop prospects, but clearer direction will only emerge after the reports. Export data for the week ending June 11 showed 2025/26 net sales of 177,100 bales, down 15% week-on-week, and shipments of 251,000 bales, down 16%. The slowing export pace, combined with macro headwinds, leaves the market without a strong upward catalyst in the near term. The Cotlook A Index, however, stood at 87.55 cents per pound, down only 75 points, indicating that the physical market has not fully caught up with the futures selloff.

Industry Impact: Cost Relief with Caution

For downstream textile mills, the price decline offers temporary relief on raw material costs. Export-oriented mills that rely on imported cotton, already squeezed by a stronger dollar, may find some offset. However, the current volatility—over 13% amplitude since May—raises the risk of locking in forward prices. In China's major textile hubs like Shandong, Henan, and Jiangsu, mills have generally adopted a hand-to-mouth procurement strategy. The falling cotton price may encourage some bargain hunting, but persistent macro headwinds could keep buying interest subdued. Meanwhile, lower polyester prices may accelerate formulation adjustments in blended yarns, further squeezing pure cotton's market share.

Practical Recommendations

For Buyers - Watch the June 30 USDA reports for acreage and inventory revisions. If the data is bearish, consider waiting for further dips to below 74 cents before building positions in batches. - The current spread between July and December contracts has widened, with July trading at a discount of over 2 cents. Use this spread for hedging forward procurement costs. - Monitor the US dollar index closely. If it breaches 102, cotton could test the 70-cent range, at which point increasing point-price purchases may be prudent.

For Exporters - Incorporate currency fluctuation protection clauses in export contracts to mitigate profit erosion from a stronger dollar. - Track procurement trends in Southeast Asian mills. Lower cotton prices may boost imports by Bangladesh and Vietnam, indirectly affecting the competitiveness of Chinese cotton yarn exports. - Use the current low price level to lock in raw material basis with overseas clients for Q3 orders, reducing risk from potential price rebounds later.