After a sharp sell-off the previous day, ICE cotton futures rebounded on June 25, with the December contract settling at 76.97 cents/lb, up 0.71 cents or 0.93%. The contract earlier hit a two-week low of 76.09 cents/lb before reversing on a combination of supportive factors. The move suggests strong psychological and capital support near the 76 cents/lb level, but whether it can develop into a sustained trend depends on fundamental alignment.
Weak Dollar and Rising Crude Oil: Dual Support from Cost and Substitution
The most direct driver of the rebound was a temporary pullback in the US dollar index. After three consecutive days of gains, the dollar weakened on June 25 as US inflation data dampened expectations of a Fed rate hike this year. A softer dollar makes dollar-denominated cotton cheaper for non-dollar holders, potentially stimulating deferred orders from global textile buyers. Meanwhile, international crude oil prices rose about 2% amid renewed Middle East tensions—a cargo ship was attacked near Oman, raising concerns about navigation safety in the Strait of Hormuz. Higher oil prices increase the cost of polyester raw materials, altering the price ratio between polyester and cotton and providing indirect support to cotton prices.
Bargain Buying: Short-Term Technical and Capital Resonance
StoneX senior vice president Bailey McHenry noted that after the previous day's sharp decline, the market saw technical repositioning, particularly from speculative funds. The strong support at current levels has attracted buyers willing to build positions. However, this bargain buying is more of a short-term capital move than a reflection of genuine industrial demand recovery. Whether speculative net longs can increase sustainably will depend on subsequent fundamental data.
Export Data Exposes Demand Weakness: Net Commitments Plunge 53%
The USDA export sales report released on June 25 poured cold water on the market. For the week ending June 18, net sales of current-crop US upland cotton were 83,864 running bales, down 53% from the previous week and 61% from the prior four-week average. Next-crop net sales were 67,089 bales. Shipments totaled 300,155 bales, up 20% week-on-week but still 16% below the prior four-week average. Shipments to China were only 12,248 bales. These figures indicate that without a clear recovery in global textile demand, the cotton price rebound lacks a solid foundation from the consumption side. Buyers remain cautious and are mainly replenishing on a need-to basis.
Cash Index Continues to Fall: Cotlook A Drops 250 Points
The futures rebound has not yet transmitted to the cash market. On June 25, the Cotlook A index fell 250 points to 85.05 cents/lb. The decline in cash quotes reflects a cautious bargaining stance: sellers are forced to lower offers as futures fall, while buyers wait for lower entry points. The widening of the futures-cash spread suggests that the futures rally is more financially driven than fundamentally based. For textile mills, procurement strategies should focus more on cash transaction prices and basis changes rather than chasing futures.