On June 26, the main ICE cotton futures contract fell to its lowest point since June 11, with the December contract settling at 76.38 cents per pound, down 0.59 cents on the day and posting a weekly loss of 4.13%. This decline reflects a confluence of two key external factors: improving weather and falling oil prices, which together are exerting significant downward pressure on the market.
Weather Improvement: Supply Expectations Rapidly Rebound
Weather conditions across major global cotton-producing regions are improving quickly. According to the latest USDA data, the proportion of U.S. cotton-growing areas affected by drought dropped to 58% in the week ending June 23, a sharp decline from 76% the previous week. This indicates that rainfall in May and June has been favorable for cotton growth, and earlier concerns about production losses due to drought are receding. India's monsoon, though delayed, has now arrived, supporting local cotton planting and development. Globally, the weather factor is shifting from bullish to bearish, prompting a market correction in supply expectations.
Falling Oil Prices: Indirect Bearish Impact on Cotton
International oil prices posted a notable weekly decline, with U.S. crude falling 3.7% on June 26 alone. Lower oil prices directly reduce the production cost of polyester fiber, a major substitute for cotton. As polyester becomes cheaper, cotton's relative competitiveness weakens. Industry sources note that oil, as the world's most important commodity, directly influences synthetic fiber prices and indirectly transmits that pressure to the cotton market. External markets are now exerting a mild negative sentiment on cotton, which is fully reflected in futures trading.
Grain Market Linkages and Report Expectations
In the grain market, corn and soybeans retreated due to expanding high-temperature zones in the U.S. Midwest, while wheat faced supply pressure from advancing harvests. This broadly bearish agricultural commodity sentiment is dragging on cotton market sentiment. Investors are now closely watching the USDA's annual planted acreage and quarterly stocks report, due June 30. Analysts expect U.S. corn stocks as of June 1 to reach 5.408 billion bushels, the highest for that date since 1988. Such a figure could further reinforce expectations of ample overall agricultural supply.
Market Impact and Key Points to Watch
For the textile supply chain, the short-term decline in cotton prices could mean lower raw material procurement costs. However, this does not necessarily signal a trend reversal—weather remains uncertain, and if the USDA report shows lower-than-expected cotton acreage, it could quickly reverse the current downtrend. Meanwhile, ICE deliverable cotton stocks have fallen to 187,250 bales, down from the previous week, indicating some spot market support.