The dual pressure of a strengthening dollar and plunging crude oil prices is delivering a fresh shock to global cotton markets. As of the close on June 24, the ICE cotton December futures contract fell 2.47 cents, or 3.14%, settling at 76.26 cents per pound, after touching an intraday low of 76.15 cents—the lowest since June 15. This marks the fourth consecutive daily decline for the contract, with cumulative losses exceeding 5%.
Macro Double Whammy: Dollar and Oil Linkage
The US dollar index hit 101.8 intraday on June 24, the highest in 13 months since May 12, 2025, and ended the New York session up 0.19% at 101.58. The rally was fueled by rising expectations of further Fed rate hikes this year and safe-haven inflows triggered by a tech stock selloff. A stronger dollar makes dollar-denominated commodities more expensive for foreign buyers, curbing demand.
At the same time, benchmark Brent crude oil fell more than $3 per barrel to its lowest since before the Iran conflict, as supply fears eased with more tankers leaving the Strait of Hormuz. Lower oil prices reduce the production cost of polyester—the main substitute for cotton—making it more competitive in the spinning process and pressuring cotton's market share.
Fundamentals: Waiting for the USDA Data Window
The market is in a critical wait-and-see period. The USDA is set to release its acreage and stocks reports on June 30, which will directly shape expectations for the 2025/26 global cotton supply-demand balance. Cotton prices had surged above 88 cents per pound on May 13, but the subsequent pullback has erased most of those gains. Kansas-based commodity analyst Sid Love noted that prices could find support until more clarity emerges on new-crop prospects after significant rainfall following a drought period. This means weather is becoming a key short-term variable.
On the export side, data for the week ending June 11 showed 2025/26 net sales of 177,100 bales, down 15% from the previous week, while exports of 251,000 bales fell 16%. The weakening export data reflects overseas buyers' cautious stance at current price levels. The USDA will release weekly export sales data on June 26 at 8:30 PM Beijing time, which will provide clues on whether demand is improving at the margin.
Supply Chain Signals: Futures vs. Spot Spread
The futures rout is beginning to spill over into the physical market. The Cotlook A Index stood at 87.55 cents per pound on June 24, down 75 points. Notably, the spread between the December futures settlement of 76.26 cents and the Cotlook A Index of 87.55 cents is over 11 cents, historically wide. For textile mills, this means that while spot prices remain relatively firm, the weakness in futures suggests growing expectations of a looser supply outlook.
From an industrial cluster perspective, spinners in key importing countries such as China, Vietnam, and Bangladesh have generally slowed their purchasing pace. The stronger dollar, combined with yuan exchange rate fluctuations, creates significant uncertainty in the actual cost of imported cotton. Some small and medium-sized mills have shortened their raw material inventory cycles from the typical 30 days to 15-20 days to hedge against downside price risk.