The dual pressure from a strengthening U.S. dollar and plunging crude oil prices is triggering a chain reaction in the global cotton market. ICE cotton futures have fallen for four consecutive sessions, with the benchmark December contract dropping over 3%, erasing gains from the past two weeks.
Dollar and Crude: Two Forces Converge
On June 24, the ICE December cotton futures settled at 76.26 cents per pound, down 2.47 cents from the previous session, hitting an intraday low of 76.15 cents, the lowest since June 15. The nearby July contract fell 1.25 cents to 73.96 cents. The trigger was highly concentrated: the U.S. dollar index rose to 101.8 during the session, a 13-month high, and remained elevated at 101.58 at the New York close.
A stronger dollar makes U.S. cotton more expensive for foreign buyers, directly dampening purchasing appetite. A Kansas-based commodity analyst noted that a strong dollar typically pressures all commodities by raising the cost for overseas buyers. Meanwhile, global benchmark crude oil prices tumbled over $3 on the same day, falling to their lowest level since before the Iran conflict, as supply concerns eased after more stranded tankers departed the Strait of Hormuz.
The impact of lower oil prices on cotton is more indirect but equally critical. Polyester, a key substitute for cotton, is directly linked to crude oil costs. Cheaper oil lowers polyester production costs, making synthetic fibers more attractive to textile mills, especially when end-user demand is weak. This substitution effect can further compress cotton consumption.
Industry Impact: Export Competitiveness and Substitution
For U.S. cotton exports, the current price environment is challenging. Data for the week ending June 11 showed net sales of 2025/26 U.S. cotton at 177,100 bales, down 15% from the previous week, while exports fell 16% to 251,000 bales. With the dollar remaining strong, this downtrend may be difficult to reverse in the near term.
Major importers such as China, Vietnam, and Bangladesh tend to slow purchases during a strong dollar cycle, instead drawing down domestic inventories or seeking cheaper supplies from other origins. This puts direct inventory pressure on U.S. farmers and traders.
However, the outlook is not entirely bearish. The same analyst noted that prices may find support until the USDA releases its crucial acreage and stocks report on June 30. Recent heavy rains in previously drought-stricken areas have improved new-crop prospects, but more clarity is needed. If the acreage report shows lower-than-expected planting, it could trigger a rebound; conversely, if rains boost yield expectations, further downside pressure may emerge.