The US dollar index surged to a 13-month high, combined with a sharp drop of over $3 in international crude oil prices in a single day, creating a rare dual pressure on international cotton prices. The most active ICE cotton December contract fell for four consecutive trading days, settling at 76.26 cents per pound on June 24, down 2.47 cents or 3.14%, and hitting an intraday low of 76.15 cents, the weakest since June 15. The nearby July contract also weakened, closing at 73.96 cents per pound, down 1.66%.
The Transmission Logic of a Strong Dollar and Falling Oil
The strong performance of the US dollar index is a core macro factor weighing on cotton prices. On June 24, the dollar index hit 101.8 intraday, its highest since May 12, 2025, and remained near 101.58 at the New York close. The dollar strengthened for a third consecutive day, driven by rising expectations of Fed rate hikes this year and safe-haven inflows amid a tech stock selloff. For international cotton trade, a stronger dollar makes US cotton more expensive for foreign buyers, directly suppressing export demand. A Kansas-based commodity analyst noted that a strong dollar systematically pressures all commodity prices, and cotton is no exception.
Simultaneously, the plunge in crude oil prices amplified the downward pressure on cotton. On June 24, Brent crude fell over $3 to its lowest level since before the Iran conflict, as more previously stranded tankers left the Strait of Hormuz, easing supply concerns. Lower oil prices directly reduce the production cost of polyester, the main substitute for cotton in textile raw materials. This substitution effect becomes more pronounced amid ongoing expansion of chemical fiber capacity, giving textile mills more bargaining power in raw material selection.
Industry Impact: Narrowing Export Window vs. Inventory Expectations
The current price environment is unfavorable for US cotton exporters. USDA data for the week ending June 11 showed 2025/26 net sales of 177,100 bales, down 15% from the previous week, while actual shipments of 251,000 bales fell 16% week-on-week. The weakening export data forms a positive feedback loop with the rising dollar. If the dollar remains high, US cotton signings may continue to face headwinds in the coming weeks, particularly from major Southeast Asian buyers like Vietnam and Bangladesh.
However, the market is not entirely pessimistic. The same analyst pointed out that before June 30, with rainfall following drought and clearer prospects for new crops, cotton prices could find some support. This suggests the current decline is more of a short-term macro and sentiment-driven disturbance rather than a sign of a fundamental trend reversal.
Key Data Points: USDA Reports to Set Short-Term Direction
Market focus has shifted to the USDA's Acreage and Quarterly Stocks reports due next Tuesday, June 30. These reports will provide the final official data on 2025/26 US cotton planted acreage and old-crop stocks as of June 1, making them the most important basis for judging the new season's supply-demand balance. Ahead of this, speculative capital tends to stay on the sidelines, leading to increased price volatility.
Additionally, the USDA will release weekly export sales data at 8:30 AM ET on June 26. Last week's data showed a sequential decline; if this week's data continues to weaken, it will reinforce short-term bearish sentiment. Conversely, an unexpected rebound could trigger a short-covering rally.