ICE Cotton Futures Hit Monthly Low Under Dual Pressure from Strong Dollar and Falling Oil Prices

Cotton markets are undergoing a rapid correction driven by macro factors. On June 24, the ICE cotton futures active December contract settled at 76.26 cents per pound, down 3.14% on the day, hitting an intraday low of 76.15 cents, the lowest since June 15. This marks the fourth consecutive session of decline, erasing most gains since mid-June.

Macro Pressure in Concert

The core driver of this price drop comes from external markets. The US dollar index touched 101.8 during the session, the highest since May 12, 2025, strengthening for a third straight day. Rising expectations for further Fed rate hikes this year, coupled with a tech stock sell-off fueling risk aversion, jointly pushed the dollar higher. For dollar-denominated commodities, a stronger dollar means higher procurement costs for overseas buyers, dampening demand.

Simultaneously, global benchmark crude oil prices slumped over $3 a barrel to the lowest level since the easing of tensions with Iran. As more previously stranded tankers departed the Strait of Hormuz, supply concerns eased significantly. Lower oil prices directly reduce polyester fiber production costs. As a major substitute for cotton, cheaper polyester further squeezes cotton's consumption space. Analyst Sid Love of Kansas noted that a stronger dollar typically drags on all commodities, while falling oil prices put cotton at a competitive disadvantage in the fiber market.

Weak Fundamental Data

Beyond macro headwinds, cotton's own supply-demand fundamentals offered little support. USDA's export sales data for the week ending June 11 showed 2025/26 net sales of only 177,100 bales, down 15% from the previous week; exports of 251,000 bales fell 16% week-on-week. This data suggests overseas buyers were reluctant to purchase when international cotton prices were higher.

The physical market also buckled. On June 24, the Cotlook A index stood at 87.55 cents per pound, down 75 points. The decline in spot prices tracking futures reflects strong wait-and-see sentiment among downstream textile mills, with purchases limited to immediate needs and no signs of aggressive bargain hunting.

Key Reports Loom, Market Awaits Direction

The market now focuses on USDA's acreage and stocks reports due June 30 (next Tuesday). These reports will provide critical guidance on the new crop supply outlook. Specifically, how crops in previously drought-stricken areas recover after recent rainfall will directly influence market expectations for forward production. Love added that before the June 30 report and clearer prospects for new crops, cotton prices may find some support at current levels.

Additionally, USDA's weekly export sales data will be released on the evening of June 26. The market will watch whether last week's weakness persists. Continued softness in exports could further fuel bearish sentiment.

Practical Recommendations

For Buyers - Current cotton prices are in a short-term correction channel. However, with the July contract approaching delivery, the spread between near and far months may widen. Consider monitoring support levels for the December contract in the 75-76 cents/lb range. If the report is bullish, consider locking in forward order costs in batches. - The spread between the Cotlook A index and futures has narrowed. For physical purchases, prioritize pricing based on the index to avoid chasing prices during volatile futures moves.

For Foreign Trade Companies - A persistently stronger dollar means higher import costs for cotton priced in RMB or other currencies. Foreign trade companies are advised to accelerate settlement or use forward hedging tools to manage currency risk. - Monitor buyer dynamics in Southeast and South Asia. A stronger dollar may weaken their purchasing power, raising the risk of order delays or cancellations. Adjust pricing strategies by incorporating floating exchange rate clauses as appropriate.