Cotton futures have faced sustained pressure over the past four trading sessions. The ICE December contract settled at 76.26 cents per pound on June 24, down 2.47 cents or 3.14% from the previous session, hitting an intraday low of 76.15 cents—its weakest level since June 15. The nearby July contract also fell 1.25 cents to close at 73.96 cents. This decline is not an isolated event but the result of a confluence of macroeconomic and fundamental factors.
Dual Pressure from a Strong Dollar and Crude Oil Plunge
The US dollar index surged to 101.8 on June 24, its highest since May 2025, marking its third consecutive day of gains. Markets are pricing in potential Fed rate hikes later this year, while a tech stock selloff has fueled safe-haven demand, providing strong support for the greenback. For dollar-denominated commodities like cotton, a stronger dollar raises costs for overseas buyers, directly dampening demand expectations. Kansas-based commodity analyst Sid Love noted that a stronger dollar tends to pressure all commodities, and cotton is no exception.
Meanwhile, global benchmark crude oil prices tumbled more than $3 on the same day, closing at their lowest level since the easing of tensions in Iran. As more previously stranded tankers departed the Strait of Hormuz, supply concerns eased significantly, triggering the sharp drop. The impact on cotton prices is direct: lower oil prices reduce production costs for polyester, a key substitute for cotton. As polyester becomes cheaper, its price advantage expands, further eroding cotton's share of textile raw material demand. For mills, the changing spread between cotton and polyester is altering blending ratios.
Fundamentals: Slowing Exports and Inventory Expectations
Cotton prices peaked above 88 cents per pound on May 13 but have since retreated steadily. Beyond macro factors, industry-side data is also releasing pressure. USDA export sales data for the week ending June 11 showed net sales of 2025/26 crop cotton at only 177,100 bales, down 15% from the previous week. Export shipments totaled 251,000 bales, down 16% week-over-week. The slowdown in export momentum suggests overseas demand is not as robust as previously anticipated, especially given that textile mill operating rates in Southeast Asia have not yet fully recovered.
Investors are now awaiting two key USDA reports scheduled for release on June 30: the acreage report and the quarterly stocks report. These will provide clearer signals on supply-side prospects for the new season. Analysts suggest that before the drought-affected regions receive adequate rainfall and the new crop outlook becomes clearer, cotton prices may find support around the 75-76 cents per pound level. If acreage data falls below market expectations, a short-term rebound is possible; conversely, if acreage exceeds expectations, downward pressure could intensify.
Transmission to the Textile Supply Chain
The consecutive drop in cotton prices has divergent impacts along the textile supply chain. For cotton spinning mills, lower raw material costs offer short-term relief on profit margins, especially for those that purchased high-priced inventories earlier and now face inventory devaluation risks. However, the key question is whether this price decline can effectively pass through to downstream fabric and apparel segments, which depends on the strength of end-user orders. The global apparel retail market remains challenged by inflation and divergent consumer spending, making buyers highly price-sensitive.
On the currency front, a persistently strong dollar has dual effects on export-oriented mills. On one hand, cotton imports denominated in dollars become cheaper, benefiting users of imported cotton. On the other hand, if the renminbi depreciates against the dollar, it could boost the price competitiveness of textile and apparel exports. However, currency volatility adds uncertainty, making mills more cautious when signing forward orders.