Cotton futures are experiencing a rare streak of consecutive losses. On June 24, the most active December contract on ICE settled at 76.26 cents per pound, down 3.14% on the day, hitting its lowest since June 15. This marks the fourth straight session of decline, with the July contract also falling 1.66% to 73.96 cents. For the textile industry, this signals a structural shift in raw material costs, widening both procurement opportunities and risk exposure.
Dollar and Crude: Twin Pressures
The driving forces behind this sell-off are external macro factors. The US dollar index strengthened for a third straight day, touching 101.8, its highest in 13 months. Markets are pricing in expectations of a Fed rate hike this year, and a tech stock sell-off has boosted safe-haven demand for the dollar. A stronger dollar makes cotton more expensive for foreign buyers, suppressing international demand.
At the same time, a sharp drop in crude oil prices amplified the pressure. Brent crude fell over $3 on the day, closing at its lowest since tensions eased in the Iran conflict, as more stranded tankers departed the Strait of Hormuz, easing supply concerns. Lower oil prices reduce the production cost of polyester fiber, a direct substitute for cotton in spinning. When polyester becomes more cost-competitive, mills adjust their blending ratios to use less cotton, further dampening demand.
Industry Impact: Cost Game and Substitution
The sustained decline in cotton prices has different transmission effects along the textile chain. For upstream ginners and farmers, the drop from above 88 cents on May 13 to current levels represents a loss of over 13%, squeezing profit margins significantly. Some holders may accelerate spot sales to cut losses, putting further pressure on cash prices. The Cotlook A index fell 75 points to 87.55 cents on June 24, confirming the bearish trend in physical markets.
For midstream spinners, lower cotton prices could reduce raw material costs, but the situation is nuanced. The growing cost advantage of polyester forces mills to decide between cotton and synthetic fibers. If cotton continues to fall and the price gap narrows, some orders may shift back to cotton. But in the short term, spinners prefer to wait, delaying procurement until after the key USDA report.
Downstream apparel and home textile buyers are in a favorable position. Falling cotton prices mean lower fabric costs, allowing buyers to negotiate better terms with suppliers. However, exchange rate fluctuations complicate the picture. A stronger dollar means that the cost of imported cotton and yarn in local currencies may not fall proportionally, requiring cross-currency calculations to assess true savings.
Key Catalyst: USDA Reports and Export Data
All eyes are on the USDA acreage and stocks report due June 30, which will provide critical clues on the 2025/26 supply outlook. A Kansas-based analyst noted that prices may find support until the new crop outlook becomes clearer after recent rains in drought-affected areas. If the report shows lower-than-expected acreage or tighter stocks, cotton could stage a rebound; otherwise, further downside is likely.
Export data adds to the bearish tone. For the week ending June 11, 2025/26 net sales were 177,100 bales, down 15% week-on-week, while actual exports of 251,000 bales fell 16%. Two consecutive weeks of declining exports suggest overseas buyers are cautious amid dollar strength and price volatility. The next weekly export sales report, due June 26, will be closely watched—a further drop would reinforce demand concerns.