The dollar index has surged to a one-year high, pushing the ICE cotton futures contract below 78 cents per pound, with an intraday low of 77.41 cents per pound—a new low since June 16. This marks the sixth consecutive week of net selling by speculative funds since the price rebounded to 88 cents on May 13.
For textile companies, the current price fluctuation has evolved from a simple supply-demand game into a direct transmission of macro-financial risks to physical procurement.
Dual Pressure from Strong Dollar and Weak Crude Oil
The dollar index has been climbing since May, now at a one-year high. Extended expectations of a high Fed interest rate, better-than-expected U.S. economic data, and geopolitical safe-haven demand have all boosted the dollar. For buyers using non-dollar currencies, the cost of importing U.S. cotton has risen significantly, directly suppressing overseas inquiry and booking intentions.
Meanwhile, international crude oil has fallen for two consecutive sessions, cooling inflation trading sentiment. Lower oil prices reduce production costs for polyester and other synthetic fibers, strengthening their substitution effect against cotton. With textile end-demand yet to recover, cotton prices have lost the 'inflation premium' that energy costs once provided.
On the exchange, the nearby July contract fell the most, dropping 1.25 cents to 73.96 cents per pound. The benchmark December contract closed at 78.73 cents, down 0.68 cents. Forward contracts also weakened: October fell to 77.00 cents, March 2027 to 79.85 cents.
Improved Moisture in Growing Regions: Strong Harvest Expectations Weaken Bullish Sentiment
According to the latest USDA weekly crop progress report, as of June 21, U.S. cotton squaring reached 92%, up 6 percentage points week-on-week and above last year's level. Boll formation hit 53%, also up week-on-week and far above last year's 47%.
Key producing region Texas received effective rainfall, improving soil moisture significantly. Overall cotton growth is better than last year. These data reinforce market expectations of a strong harvest, providing fundamental support for speculative funds to continue exiting.
Industry players generally believe that the 80 cents per pound level is where buying value emerges. Once prices stabilize there, downstream restocking demand may gradually be released. However, under current macro and fundamental pressures, a meaningful rebound seems unlikely in the near term.
Persistent Net Selling by Speculative Funds, Traders De-stocking
Since the May 13 peak at 88 cents, speculative funds have been net sellers, amplifying the downtrend. Many traders have closed out most forward pre-sale orders, keeping cash on the sidelines.
Market liquidity is thin, with some forward contracts seeing no trading activity. This suggests a lack of consensus on future direction, with price movement driven more by macro sentiment and capital flows than by physical supply-demand reality.