The US dollar index surged to a near one-year high, while crude oil prices fell for two consecutive sessions, dragging ICE cotton futures below 79 cents/lb, a new low since mid-June. A stronger dollar raises import costs for non-dollar buyers, hurting US cotton export competitiveness. Lower oil prices reduce polyester costs, boosting substitution. Meanwhile, rains in Texas improved soil moisture, raising yield expectations, and speculative funds continued net selling. These bearish factors pressure cotton prices, requiring textile mills to watch currency and energy volatility closely.
Macro and Energy Dual Pressure
The rising dollar index is the primary macroeconomic driver behind the current cotton price decline. Markets generally expect the Fed to maintain higher interest rates for longer, combined with stronger-than-expected US economic data and geopolitical safe-haven demand, pushing the dollar index to a near one-year high. This means non-dollar buyers face higher import costs, directly dampening overseas purchasing intentions and clouding US cotton export prospects. At the same time, international crude oil futures fell for two consecutive trading days, quickly cooling inflation trade sentiment and removing inflation-driven support for commodities like cotton. Lower oil prices directly reduce polyester production costs, strengthening substitution of chemical fibers for cotton and further squeezing cotton prices.
Stronger Yield Expectations, Speculative Funds Exit
Supply-side developments also dampened bullish sentiment. The latest USDA weekly crop progress report showed continued improvement in US cotton conditions. Key producing state Texas received beneficial rainfall, significantly improving soil moisture, with overall cotton growth levels better than last year. As of June 21, the cotton squaring rate rose to 92%, up 6 percentage points from a week earlier, above last year's level and close to the five-year average. The boll-setting rate also reached 53%, up from 47% last year. These favorable conditions strengthened market expectations of a bumper harvest, adding pressure on prices.
Looking back, after cotton prices broke above 88 cents/lb on May 13, a large wave of speculative selling began, setting the stage for the subsequent decline. Since the end of the May rebound, speculative funds have maintained net selling positions, amplifying the downtrend. Many traders have already closed most forward sales contracts, with the industry generally viewing the 80 cents/lb level as a value zone for procurement. Once prices stabilize around this level, downstream demand is expected to gradually emerge.
Key Price Levels and Outlook
In terms of market action, the most-active December 2026 cotton futures contract settled at 78.73 cents/lb, down 0.68 cents from the previous session, hitting a new low since June 16, with an intraday low of 77.41 cents/lb. The nearby July contract fell more sharply, closing at 73.96 cents/lb, down 1.25 cents on the day. Other deferred contracts also weakened, with October at 77.00 cents/lb, March 2027 at 79.85 cents/lb, and May 2027 at 80.82 cents/lb.
In summary, the combination of a dollar at one-year highs, falling crude oil, improving US cotton field conditions, better soil moisture, and persistent speculative fund selling has pushed ICE cotton futures to one-week lows. For the textile industry, this decline means lower raw material costs in the short term, but purchasing decisions require more caution—actual cost changes due to currency fluctuations may exceed futures price moves, and lower oil prices will further compress cotton demand through substitution.