Cotton futures extended their losing streak to four sessions on Wednesday, with the most-active December contract settling at 76.26 cents per pound, down 2.47 cents, or 3.14%. The July contract also fell 1.25 cents to 73.96 cents. The selloff was driven by a strengthening U.S. dollar and a sharp drop in crude oil prices, two forces that are reshaping the cost structure for textile raw materials.
Strong Dollar and Falling Oil: A Dual Squeeze
The U.S. dollar index hit 101.8 on Wednesday, its highest since May 12, 2025, marking the third consecutive day of gains. Rising expectations of a Federal Reserve rate hike this year, coupled with a tech-led equity selloff, have driven safe-haven flows into the dollar. A stronger dollar makes U.S. cotton more expensive for foreign buyers, dampening export demand. As one Kansas-based analyst noted, a robust dollar systematically pressures all dollar-denominated commodities, and U.S. cotton is no exception.
At the same time, Brent crude oil fell more than $3 per barrel to its lowest level since the easing of tensions in the Iran conflict. The departure of stranded tankers from the Strait of Hormuz eased supply fears, triggering a sharp selloff. Lower oil prices reduce the production cost of polyester, cotton's main synthetic substitute. With cotton still trading well above its May highs, the cost advantage of polyester becomes more compelling, encouraging mills to shift their fiber mix.
Market Awaits USDA Reports
All eyes are now on the USDA's June 30 Acreage and Quarterly Stocks reports. These will provide critical insights into the 2025/26 supply outlook. Analysts suggest that until the new crop's prospects become clearer—especially after recent rainfall in drought-affected areas—cotton prices may find some support, but there is no immediate bullish catalyst.
Weekly export sales data, due Thursday, will also be closely watched. In the week ending June 11, 2025/26 net sales were 177,100 bales, down 15% from the prior week, while shipments fell 16% to 251,000 bales. The slowdown in export momentum, combined with a stronger dollar, could add to near-term inventory pressure.
Implications for the Textile Chain
The correction offers a potential buying opportunity for textile mills, but the stronger dollar complicates the calculus. For mills relying on imported U.S. cotton, the effective cost may be higher than the decline in futures prices suggests. Meanwhile, lower oil prices make polyester staple fiber and filament more cost-competitive, potentially accelerating the substitution of cotton in blended yarns and fabrics. The Cotlook A Index fell 75 points to 87.55 cents per pound on Wednesday, confirming the cautious tone in the physical market.