ICE Cotton Futures Hit Two-Week Low on Strong Dollar and Plunging Oil Prices

The bullish sentiment in the cotton market is rapidly fading. On June 24, the most-active December ICE cotton futures contract settled at 76.26 cents per pound, down 3.14% on the day and hitting an intraday low of 76.15 cents, the weakest level since June 15. This marks the fourth consecutive session of declines.

Macro Pressure in Concert

The core driver behind this sell-off is macroeconomic pressure. The U.S. dollar index surged to 101.8 during the session, a 13-month high not seen since May 12, 2025, before closing up 0.19% at 101.58. The dollar strengthened for a third straight day, fueled by rising expectations of a Fed rate hike this year and safe-haven inflows triggered by a sell-off in tech stocks.

For dollar-denominated commodities, a stronger dollar directly raises procurement costs for overseas buyers and erodes export competitiveness. The decline in ICE cotton is a textbook example of this macro transmission.

Meanwhile, global crude oil prices tumbled more than $3 a barrel on June 24, with Brent crude closing at its lowest level since the easing of Iran-related tensions. The trigger was the resumption of normal traffic through the Strait of Hormuz as previously stranded tankers began moving again, alleviating supply concerns. Lower oil prices reduce the production cost of polyester, a direct substitute for cotton in textile raw materials. This cost advantage for polyester is increasingly squeezing cotton's market share.

Fundamentals and Market Expectations

Demand-side weakness is already visible in export data. For the week ending June 11, U.S. 2025/26 cotton net sales totaled 177,100 bales, down 15% from the prior week. Export shipments were 251,000 bales, a 16% decline week-over-week. The simultaneous drop in both metrics suggests that overseas mills are cautious, constrained by high prices and weak final demand.

The physical market is also under pressure. On June 24, the Cotlook A Index, a benchmark for international physical cotton, fell 75 points to 87.55 cents per pound. Although the premium over futures remains, the decline in physical prices indicates that industrial buying is not providing meaningful support.

Market attention is now firmly on the USDA's Acreage and Quarterly Stocks reports due June 30. These will provide official data on actual planted acreage for the 2025/26 season. Following significant rainfall after a drought, some analysts expect lower abandonment rates than previously assumed, which could lead to an upward revision in production estimates and add further pressure on prices.

Near-Term Outlook

A Kansas-based commodity analyst noted that ahead of the June 30 reports, improved crop prospects from post-drought rains are providing some underlying support for cotton prices. However, if the reports lean bearish, that support could quickly evaporate.

In summary, ICE cotton faces a dual threat from macro headwinds and weak demand, and the downside risk has not yet been fully exhausted. If the December contract breaks decisively below the 76 cents per pound level, the next support zone could be in the 74-75 cents range.

For Buyers - Adopt a phased pricing strategy to avoid locking in large volumes during sharp single-day declines. - Watch for volatility around the June 30 USDA reports; if the data is clearly bearish, wait for the market to stabilize before entering. - Monitor polyester staple fiber prices; if oil remains low, consider adjusting the cotton-to-polyester blend ratio in spinning to manage costs.

For Exporters - A stronger dollar means higher import costs in RMB terms; lock in forward exchange rates to hedge against currency losses. - Include exchange rate fluctuation clauses in export contracts, allowing price renegotiation if the dollar index moves beyond a certain range. - Track weekly USDA export sales data; if net sales remain low for several consecutive weeks, it signals a real weakening of overseas demand, warranting a more cautious procurement stance.