The cotton market is experiencing a rare 'triple blow': a strengthening dollar, falling oil prices, and weakening demand data, all simultaneously pressuring ICE cotton futures for four consecutive trading days. The December主力 contract fell 3.14% in a single session, settling at 76.26 cents/lb, the lowest since June 15. For the textile supply chain, this means the short-term support for raw material costs is rapidly eroding.
Macro Pressure and Substitution Impact
The U.S. dollar index hit 101.8 on June 24, a 13-month high since May 2025. Expectations of Fed rate hikes, coupled with a tech stock sell-off, drove the dollar higher for a third straight day. For international cotton trade, a stronger dollar makes U.S.-denominated cotton more expensive for foreign buyers, directly suppressing purchasing intentions. Kansas-based analyst Sid Love noted that a strong dollar puts general pressure on all commodities.
Meanwhile, global oil prices plunged over $3 per barrel on the same day, with Brent crude closing at its lowest level since before the Iran conflict. The easing of supply concerns, as more stranded tankers departed the Strait of Hormuz, was the main reason for the decline. Falling oil prices directly lower the production cost of polyester fiber, cotton's main rival in textile raw materials. When cotton prices hit above 88 cents/lb on May 13, polyester's substitution advantage was already evident; now with oil prices falling further, this substitution effect is only stronger.
Fundamental Data Sends Bearish Signals
The latest USDA weekly export data showed that for the week ending June 11, net sales of 2025/26 cotton were 177,100 bales, down 15% from the previous week; exports were 251,000 bales, down 16% from the previous week. Both sales and exports declined, indicating that overseas buyers are not in a hurry to replenish at current price levels. After this data release, market sentiment weakened further.
The spot market also came under pressure. On June 24, the Cotlook A index stood at 87.55 cents/lb, down 75 points for the day. Spot prices followed futures lower, reflecting thin actual transactions and limited purchasing willingness from downstream mills.
The market now pins hope on the USDA's upcoming planting acreage report and quarterly stocks report, due next Tuesday (June 30). If the report shows lower-than-expected planting acreage for the new season or tighter stocks, it could provide short-term support for cotton prices. But analyst Sid Love also cautioned that before June 30, cotton prices may continue to oscillate until the outlook for new crops becomes clearer after post-drought rainfall.
Industry Impact and Chain Reactions
For domestic textile mills, the consecutive decline in cotton prices means a temporary easing of raw material cost pressure, but it also brings inventory devaluation risks. Companies that stocked up heavily when cotton prices were high in May now face book losses. Meanwhile, the simultaneous decline in polyester prices further expands the substitution advantage of chemical fibers, potentially accelerating some mills' adjustment of raw material ratios.
For international cotton traders, a strong dollar combined with weak demand means that export orders face greater exchange rate and price volatility risks. Especially for purchase contracts denominated in dollars, with the RMB relatively stable, Chinese buyers' import costs may actually rise passively due to dollar appreciation.