On June 26, the main ICE cotton futures contract settled at 76.38 cents per pound, down 0.59 cents, with an intraday low of 75.50 cents, the lowest since June 11. More notably, the contract recorded a weekly loss of 4.13%, erasing nearly two weeks of gains. This downturn is driven by a dual headwind: improving weather across major cotton-growing regions and falling crude oil prices.
Weather Factor: Supply Expectations Turn Bullish
The latest USDA drought monitor shows that as of the week ending June 23, approximately 58% of US cotton areas were affected by drought, down sharply from 76% the previous week. Rainfall in May and June has been assessed as "quite favorable" by market analysts, directly improving yield expectations for the new crop. Meanwhile, the Indian monsoon, though delayed, has now covered all major producing regions, signaling normal planting conditions for the world's second-largest cotton producer.
For the textile supply chain, improving weather suggests that global cotton production for the 2026/27 season could exceed earlier estimates. The loosening supply outlook is directly weighing on futures prices, particularly eroding the premium structure of nearby contracts. Buyers should note that if weather remains favorable, the upside potential for prices before the new crop arrives is extremely limited.
Falling Oil Prices: Substitution Effect from Polyester
International oil prices recorded significant weekly losses, with WTI crude falling 3.7% on June 26. Although tanker traffic through the Strait of Hormuz initially raised supply concerns, US military strikes on Iran added to market uncertainty, sending oil prices back down after a brief rebound.
Lower oil prices directly reduce the production cost of polyester fiber. As cotton's main substitute in textile raw materials, a wider price advantage for polyester will divert some demand away from cotton. Industry data shows the spread between polyester staple fiber and cotton has widened to nearly 4,000 yuan per ton, forcing spinners to adjust their blending ratios. For export-oriented companies focused on pure cotton products, this means end customers may shift to blended or synthetic fabrics to control costs.
Market Focus: USDA Planting Report Imminent
Investors are closely watching the USDA's annual acreage and quarterly stocks report due June 30. Analysts expect US corn stocks as of June 1 to reach 5.408 billion bushels, up 16.5% year-on-year and the highest for that date since 1988. High corn inventories could pressure cotton acreage, but current favorable weather leaves this expectation uncertain.
ICE data shows deliverable cotton stocks fell to 187,250 bales as of June 25, down 2,197 bales from the previous day. The continued decline in stocks suggests some support from spot market buying, but the weakness in futures indicates the market is more focused on forward supply.
Industry Impact: Buying Window May Be Opening
From an industrial transmission logic, the rapid decline in cotton futures is reshaping textile companies' procurement pace. The current level of 75-76 cents per pound is approaching the psychological price point for some mills, but the market generally believes that before the acreage report is released, downside risks remain.
- For cotton spinners, lower raw material costs improve immediate margins, but inventory devaluation risks must be monitored.
- For fabric traders, it is advisable to reduce forward fixed-price orders and adopt floating quotations.
- For brand buyers, it may be prudent to delay large order commitments until after the report's directional signal.