The global cotton market is undergoing a price correction driven by improved weather expectations and lower energy costs. On June 26, the ICE December cotton futures contract settled at 76.38 cents per pound, down 0.59 cents from the previous session, and touched an intraday low of 75.50 cents, the weakest since June 11. The contract posted a weekly decline of 4.13%, reflecting a clear shift toward cautious sentiment.
Weather Improvements Ease Supply Concerns
The primary driver of the price decline is a change in supply-side expectations. Data from the US Department of Agriculture's drought monitor showed that as of the week ending June 23, approximately 58% of US cotton-producing areas were affected by drought, down sharply from 76% the previous week. This indicates that rainfall in May and June has substantially improved soil moisture, alleviating earlier fears of a US cotton crop reduction.
At the same time, the arrival of the Indian monsoon, though slightly delayed, has now covered major cotton-growing regions, benefiting the upcoming planting and growing season. With weather conditions improving in the world's two largest cotton producers, market expectations for the 2026/27 crop year have turned more favorable, putting downward pressure on futures prices.
Lower Oil Prices Create Substitution Pressure
External market factors are also weighing on cotton. International oil prices fell sharply this week, with NYMEX crude dropping 3.7% in a single session. Lower oil prices reduce the production cost of polyester fiber, a key substitute for cotton. As polyester becomes more cost-competitive, textile mills may shift some demand away from cotton, creating indirect bearish pressure.
From a supply chain perspective, when crude oil prices fluctuate significantly, the price ratio between chemical fibers and cotton adjusts rapidly. The current downward trend in oil prices means that synthetic fibers like polyester staple are gaining price advantages, which will dampen cotton buying interest in the near term, especially among price-sensitive spinners.
Macro Data and Market Awaits Direction
The market is currently in a wait-and-see mode ahead of key US government data. The USDA is scheduled to release its annual acreage report and quarterly stocks report on June 30, which will provide clearer guidance on agricultural supply. Analysts expect US corn stocks to be the highest for June 1 since 1988, and the overall ample supply signal from the grain market could indirectly affect risk appetite in cotton.
Meanwhile, ICE-certified cotton stocks fell to 187,250 bales, down 2,197 bales from the previous session, suggesting reduced physical delivery pressure on nearby contracts. However, this has limited impact on far-month contracts, with the market more focused on the final confirmation of new-crop planted area and growing conditions.