Cotton futures are undergoing a notable correction. ICE December cotton closed at 76.26 cents per pound on June 24, falling 3.14% in a single session and hitting the lowest intraday level since June 15. This marks the fourth consecutive day of declines, with prices now more than 13% below the May 13 peak of over 88 cents. The selloff reflects a confluence of macroeconomic and industry-specific pressures rather than isolated events.
Macro Headwinds: Strong Dollar and Plunging Oil
The U.S. dollar index surged to 101.8 on June 24, the highest since May 2025, extending gains for a third straight session. Rising expectations of Federal Reserve interest rate hikes this year, coupled with a tech-stock selloff that fueled safe-haven demand, have lifted the greenback. For cotton, a stronger dollar makes U.S.-priced bales more expensive for foreign buyers, dampening import demand in an already soft market.
Meanwhile, global crude oil prices fell more than $3 per barrel on June 24, settling at their lowest level since before the Iran conflict escalation. As more previously stranded tankers departed the Strait of Hormuz, supply concerns eased. Lower oil prices reduce cotton transportation costs but, more importantly, lower the production cost of polyester fiber—cotton’s main substitute in textile manufacturing. The widening cost advantage of polyester is prompting spinners to reconsider their raw material mix, a shift that could persist as long as oil remains weak.
Market Signals: Weak Exports and Pre-Report Jitters
Fundamental demand for cotton remains tepid. USDA data for the week ending June 11 showed 2025/26 net sales of just 177,100 bales, down 15% from the prior week, while exports of 251,000 bales fell 16% week-on-week. These figures suggest overseas buyers are reluctant to commit at current price levels, especially as a stronger dollar raises import costs for emerging-market customers.
Market attention is now fixed on the USDA’s June 30 Acreage and Quarterly Stocks reports. After a dry spell, heavy rainfall has returned to key growing regions, improving the outlook for the new crop. A Kansas-based analyst noted that prices may find some support before the reports are released, but once supply expectations are clarified, direction will become clearer. The USDA is also scheduled to release weekly export sales data on June 26, which will provide fresh clues on demand.
Industry Transmission: From Futures to Physical Market
The futures rout is spilling over into physical trade. The Cotlook A Index fell 75 points to 87.55 cents per pound on June 24. Softening spot quotes mean wider negotiating room for international traders, but also higher inventory depreciation risk for holders. For downstream buyers, however, this could open a window for opportunistic restocking.
From a supply chain perspective, the cotton-polyester price gap is reshaping spinner blending decisions. When cotton is significantly more expensive than polyester, mills increase synthetic fiber usage, and vice versa. While cotton has retreated from its highs, its absolute price remains above polyester, and lower oil costs are further reducing polyester’s cost. This substitution effect is unlikely to fade quickly. For cotton prices to stabilize and rebound, genuine demand recovery—not just supply-side narratives—will be required.