The US dollar index surged to a near one-year high, while international crude oil fell for two consecutive trading days. On June 25, the main ICE cotton futures contract closed at 78.73 cents/lb, down 0.68 cents from the previous session, hitting an intraday low of 77.41 cents/lb—a new low since June 16. The nearby July contract fell even more sharply, settling at 73.96 cents/lb, down 1.25 cents in a single day. This decline is not driven by a single factor but by a convergence of macro-financial and industrial fundamentals.
Macro Pressure: Double Squeeze from Strong Dollar and Falling Oil
The core driver of this cotton price weakness comes from intense fluctuations in the macro-financial markets. The US dollar index has climbed to a near one-year high, driven by market expectations that the Federal Reserve will maintain high interest rates for a longer period, coupled with better-than-expected US economic data and safe-haven demand from global geopolitical tensions. A stronger dollar means non-US currency buyers must pay higher costs to import US cotton, directly suppressing overseas purchasing intentions and casting a shadow over US cotton export prospects.
Meanwhile, weakness in the energy market has further dampened market sentiment. International crude oil futures fell for two consecutive sessions, rapidly cooling inflation trading enthusiasm and stripping cotton of its inflation-buying support. More critically, lower oil prices directly reduce polyester production costs, strengthening the substitution effect of synthetic fibers for cotton. For textile buyers, cheaper synthetics make it more economical to use alternatives like polyester in fabric formulations, further eroding cotton's rigid demand.
Industrial Fundamentals: Strengthened Bumper Harvest Expectations and Persistent Fund Liquidation
Supply-side positive news also dampened bullish confidence. The latest weekly crop progress report from the US Department of Agriculture showed continued improvement in US cotton growth conditions. Key producing region Texas received effective rainfall, significantly improving soil moisture, with overall cotton growth levels surpassing last year. As of June 21, the US cotton boll-setting rate reached 92%, up 6 percentage points from the previous week and above last year's level, just one step away from the five-year average. The boll-opening rate also rose to 53%, a sequential increase and well above last year's 47%. These favorable crop conditions have reinforced the market's expectation of a bumper harvest, adding further pressure on cotton prices.
Looking back at the market, after cotton prices broke above 88 cents/lb on May 13, a large number of speculative funds began concentrated selling, laying the groundwork for subsequent price declines. Since the end of this rebound in May, speculative funds have maintained a net selling position, continuously amplifying the downtrend. Many traders have already closed out most forward pre-sale orders. The industry generally believes that the 80 cents/lb level is the price zone with purchasing value. Once cotton prices stabilize in this range, downstream potential procurement demand will gradually be released.
Market Outlook: Short-Term Weakness Persists, Waiting for Price Anchor
From the trading screen, as of the morning Indian standard time, the December 2026 contract was quoted at 78.55 cents/lb, down 0.18 cents; spot cotton was at 73.43 cents/lb, down 0.86 cents; the July contract remained at 73.96 cents/lb. Other forward contracts also weakened: October fell to 77.00 cents/lb, March forward to 79.85 cents/lb, and May to 80.82 cents/lb.
In summary, the combination of a one-year high dollar, falling crude oil prices, improved US cotton field conditions, better soil moisture, and persistent speculative fund liquidation has directly pushed ICE cotton futures to a one-week low. For downstream textile enterprises, current cotton prices have not yet reached the psychological price level of most buyers. The market is in a stalemate phase of "buyers waiting and sellers under pressure." In the short term, cotton prices are expected to consolidate around 78 cents/lb. A further break below 77 cents could trigger more stop-loss selling, accelerating the decline; conversely, if support is found near 80 cents, procurement demand may gradually emerge.