ICE cotton futures extended their losing streak to a fourth straight session on Wednesday, June 24, with the December contract settling at 76.26 cents per pound, down 3.14% on the day. This marks a decline of over 12 cents, or roughly 13.5%, from the mid-May peak above 88 cents. For the textile industry, this sell-off is not an isolated event but a textbook case of dual pressure from a strengthening US dollar and cheaper competing fibers.
Strong Dollar and Plunging Oil Prices Form a Dual Drag
The US dollar index hit 101.8 during the session, its highest level in 13 months since May 12, 2025, before closing at 101.58, up 0.19% from the previous day. A stronger dollar makes dollar-denominated cotton more expensive for buyers using other currencies, effectively dampening demand. Meanwhile, Brent crude oil tumbled more than $3 a barrel to its lowest since before the Iran conflict, as more tankers previously stranded in the Strait of Hormuz resumed passage, easing supply concerns.
The direct industrial impact of lower oil prices is a reduction in polyester production costs. Cotton and polyester are widely substitutable in apparel fabrics. When polyester becomes cheaper, spinners tend to adjust their blend ratios, reducing cotton consumption in favor of synthetic fibers. Although cotton prices have already corrected significantly, the polyester cost advantage remains intact, limiting the upside for cotton in the near term.
Weak Export Data and Pre-Report Caution
The latest USDA weekly export data showed net sales of 2025/26 cotton at just 177,100 bales for the week ending June 11, down 15% from the prior week. Export shipments totaled 251,000 bales, down 16% week-on-week. The consecutive weakness in export data reflects sluggish global textile demand recovery, particularly from key buying regions in Southeast Asia and China.
The market is now in a wait-and-see mode ahead of the USDA's Acreage and Quarterly Stocks reports, due June 30. These reports will provide crucial clues about the new-crop supply outlook. Until then, traders are likely to remain cautious, with position adjustments dominated by liquidation and reduction, adding to price volatility. Additionally, the USDA is scheduled to release its weekly export sales report on June 26; if that data remains weak, it could trigger another leg lower.
Rains Offer Long-Term Support But Short-Term Risks Persist
A Kansas-based commodity analyst noted that if heavy rainfall arrives in drought-stricken areas before June 30, the new-crop outlook will become clearer, potentially providing some support for cotton prices. The drought condition in key US growing regions—especially Texas—remains a focal point. Timely rains would alleviate fears of a production shortfall, while continued dryness could underpin forward prices.
In the short term, however, the dollar's strength cycle is far from over. Rising expectations of Federal Reserve rate hikes, coupled with a sell-off in tech stocks, are reinforcing the dollar's safe-haven appeal. Meanwhile, the easing of supply-side pressures in the crude market suggests oil prices are unlikely to rebound significantly soon, keeping polyester costs low. Taken together, cotton prices are likely to oscillate in a low range of 75-78 cents per pound through the last week of June, lacking the momentum for a meaningful breakout.
Transmission Effects on the Textile Chain
The sustained decline in cotton prices is a double-edged sword for domestic textile mills. On one hand, lower raw material costs help improve margins in the spinning segment, especially as mills gradually work through high-priced inventories. On the other hand, the narrowing price gap between cotton and man-made fibers could accelerate downstream substitution decisions, squeezing demand for pure-cotton products. For export-oriented cotton textile companies, a stronger dollar reduces the renminbi cost of imported cotton but also erodes the price competitiveness of export products in overseas markets due to exchange rate effects.