ICE cotton futures fell for the fourth consecutive session on June 24, with the benchmark December contract settling at 76.26 cents per pound, down 3.14%, hitting the lowest level since June 15. The nearby July contract also weakened, dropping 1.25 cents to 73.96 cents per pound. This decline was driven by a double blow from a strong US dollar and a sharp drop in crude oil prices.
Strong Dollar Pressures Commodities
The US dollar index surged to 101.8 during the session, a 13-month high, closing at 101.58. Market expectations of further Fed rate hikes, coupled with a tech stock selloff boosting safe-haven demand, fueled the dollar's rally. A stronger dollar makes dollar-denominated cotton more expensive for foreign buyers, directly undermining US cotton's international competitiveness. A Kansas-based analyst noted that a strong dollar typically pressures all commodities.
Crude Oil Plunges Over $3, Boosting Polyester Substitution
Global benchmark crude oil prices fell more than $3 per barrel on the same day, closing near their lowest level since the Iran conflict erupted. As more tankers previously stranded in the Strait of Hormuz cleared the waterway, supply concerns eased significantly, triggering the oil price collapse. Lower crude oil prices reduce the production cost of polyester fiber, the main substitute for cotton in textile raw materials. When the cost advantage of man-made fibers widens, textile mills often reduce cotton usage, adding extra downward pressure on cotton prices.
Market Awaits USDA Reports
The market is in a wait-and-see mode ahead of key data releases. The USDA is scheduled to release its acreage and quarterly stocks reports on June 30, which will provide crucial insights into new-crop supply expectations. Recent heavy rainfall in major US cotton-growing areas, following a drought, has improved new-crop prospects, weighing on bullish sentiment. Meanwhile, the USDA's weekly export sales report, due June 26, showed net sales for 2025/26 down 15% from the previous week and exports down 16%, a clear sign of weakening demand.
Implications for the Supply Chain
Cotton prices have fallen over 13% from the May 13 high above 88 cents per pound to the current 76-cent level. For textile mills, this decline may present a restocking opportunity, but currency volatility and oil price uncertainty require cautious procurement decisions. For ginners and traders, current prices are below some holding costs. The Cotlook A index fell 75 points to 87.55 cents per pound, widening the basis risk.