ICE cotton futures fell to their lowest level since June 11 on June 26, settling at 76.38 cents per pound, down 0.59 cents on the day and 4.13% for the week. The decline was driven by improved weather conditions in major cotton-producing regions and a drop in crude oil prices.
Weather Improves, Supply Pressure Builds
USDA drought data showed that as of the week ending June 23, about 58% of US cotton areas were affected by drought, down from 76% the previous week. This indicates that rainfall in May and June has been favorable for US cotton yields. Meanwhile, India's monsoon has arrived, albeit late, which is positive for cotton sowing and growth. The synchronized improvement in weather across the world's two largest cotton producers has boosted expectations for increased supply in the 2026/27 season, putting pressure on futures prices.
Oil Prices Fall, Making Polyester Cheaper
The crude oil market also transmitted pressure to cotton. On June 26, US oil prices fell 3.7%, posting a significant weekly decline. Although a tanker attack in the Gulf of Oman had briefly raised supply concerns, sentiment quickly stabilized as tanker traffic resumed. Lower oil prices reduce the production cost of polyester, a major substitute for cotton in textile raw materials. When synthetic fiber costs decline, downstream mills may shift their purchasing preferences, indirectly weakening cotton demand.
External Market Linkages and Key Data Awaited
Grain market performance also added to the cautious mood. Expanding high temperatures in the US Midwest caused corn and soybeans to retreat after earlier gains, while wheat fell on harvest pressure. The overall agricultural sector lacks clear direction, and capital is in a wait-and-see mode. Investors are focusing on the USDA's annual planting area report and quarterly stocks report, due June 30. Analyst surveys show that US corn stocks as of June 1 are expected to be 16.5% higher year-on-year, the highest for that date since 1988. If realized, this would reinforce expectations of ample global grain supply and could indirectly dampen risk appetite for cotton.
Spot Market Weakens, Stocks Edge Down
On the spot side, the Cotlook A index fell 250 points to 85.05 cents per pound on June 25. ICE deliverable No.2 cotton stocks edged down to 187,250 bales from 189,447 the previous day. The marginal decline in stocks did not support the market, suggesting that current trading logic is dominated by forward supply expectations and external macro factors.