The 76-cent-per-pound level is emerging as a new battleground for bulls and bears in the cotton market. On June 25, the ICE December cotton contract dipped to 76.09 cents, its lowest since June 11, before staging a sharp rebound to settle at 76.97 cents, up 0.71 cents. The rally, fueled by a weaker dollar, a surge in crude oil prices, and speculative bargain buying, has injected a dose of short-term optimism into a market that had been under sustained pressure.
External Tailwinds: A Weaker Dollar and Higher Oil
The US dollar index snapped a three-day winning streak after domestic inflation data dampened expectations for a Fed rate hike this year. A softer dollar makes dollar-denominated cotton cheaper for overseas buyers, a critical factor when export demand is already tepid. At the same time, crude oil rallied more than 2% as Middle East tensions escalated once again—a cargo vessel was struck near Oman, prompting the International Maritime Organization to suspend vessel evacuations in the Strait of Hormuz. Higher oil prices raise the cost of polyester, a key substitute for cotton, thereby improving cotton's relative competitiveness.
Speculative Flows: Bargain Hunters Step In at 76 Cents
The price action suggests a technical rebound. A senior analyst at StoneX noted that after the previous session's heavy selloff, strong buying interest emerged around the 76-cent level, particularly from speculative funds. This indicates that 76 cents has become a psychological floor. Whether this support holds will depend on whether it triggers actual fix-price purchases and physical offtake from the industry.
Export Data: Mixed Signals, But Shipments Recover
The USDA's weekly export sales report for the week ended June 18 showed current-crop net sales of 83,864 bales, down 53% from the prior week and 61% below the four-week average. Next-crop sales were 67,089 bales, bringing the combined total to roughly 151,000 bales. While sales were weak, shipments surged 20% week-on-week to 300,155 bales, including 12,248 bales to China. The divergence between current-crop and next-crop sales suggests buyers are locking in lower prices for next year while remaining cautious on prompt supply.
Outlook: Support Is Near-Term, Not Structural
The buying interest around 76 cents provides a near-term floor, but a sustained uptrend requires two conditions: continued dollar weakness and a recovery in end-user textile demand. The Cotlook A Index at 85.05 cents, down 250 points on the day, shows spot markets are not following futures higher. For major importers like China and Vietnam, the current spread between domestic and international cotton prices remains unfavorable for imports, limiting mill restocking appetite.