International cotton prices are undergoing a rapid correction. As of the close on June 24, the active December ICE cotton futures contract settled at 76.26 cents per pound, down 3.14% on the day and hitting the lowest intraday level since June 15. This marks the fourth consecutive session of decline, representing a drop of over 13% from the year-to-date high of 88 cents per pound reached on May 13.
The simultaneous movement of the US dollar index and crude oil prices is the core driver behind this sell-off. The dollar index rose for a third straight session, touching 101.8, its highest since May 12, 2025. Expectations of a Federal Reserve rate hike this year, coupled with safe-haven demand from a tech stock sell-off, have jointly pushed the greenback higher. For global cotton trade, a stronger dollar makes dollar-denominated cotton more expensive for buyers outside the US, directly curbing purchasing appetite. A Kansas-based analyst noted that a stronger dollar exerts systemic pressure across all commodities.
Meanwhile, Brent crude plunged over $3 a barrel to its lowest level since before the escalation of the Iran conflict, as more tankers previously stranded near the Strait of Hormuz resumed sailing, easing supply concerns. The direct industrial consequence of lower oil prices is reduced production costs for polyester fiber, thereby weakening cotton's relative price advantage among textile raw materials. In a market sensitive to substitution effects, this transmission chain is accelerating capital outflows from the cotton market.
Industry Impact
The impact of consecutive cotton price declines is rippling through the supply chain. For major cotton importers such as China, Vietnam, and Bangladesh, a stronger dollar combined with lower cotton prices creates structural divergence in procurement costs. On one hand, import costs denominated in local currencies have not fallen proportionally due to exchange rate depreciation; on the other hand, the absolute drop in cotton prices offers an opportunity for mills to replenish inventories at lower levels, provided that end-user order demand can support it.
From a competition perspective between cotton and man-made fibers, lower oil prices directly reduce production costs for polyester staple fiber and filament. At the fabric level, the blend ratio of polyester-cotton products may face adjustments, with some orders potentially shifting from pure cotton to blends or pure polyester. This poses a medium-term bearish factor for cotton consumption, especially against a backdrop of still-tepid global textile and apparel demand.
The market is now focused on two key USDA reports. The first is the weekly export sales data due on Thursday, June 26. The previous week (ending June 11) showed net sales of 177,100 bales for the 2025/26 season, down 15% from the prior week, and exports of 251,000 bales, down 16% week-over-week. The slowdown in export momentum confirms overseas buyers' wait-and-see attitude amid high prices and a strong dollar.
The more critical date is Tuesday, June 30, when USDA releases its annual Acreage and quarterly Stocks reports. Following significant rainfall after a drought in major US growing regions, new crop prospects have improved, and the market generally expects a slight upward revision in planted acreage. If the report confirms higher acreage, cotton prices could fall further; conversely, a surprise reduction could trigger short covering.