On June 24, ICE cotton futures fell for the fourth consecutive session, with the active December contract dropping 2.47 cents to settle at 76.26 cents per pound, a 3.14% decline and the lowest intraday level since June 15. The cumulative loss over the past week exceeds 6%, and the retreat from the mid-May peak above 88 cents now stands at nearly 14%.
Dual Pressure from Dollar and Oil
The immediate catalyst for the selloff came from macro headwinds. The US dollar index hit 101.8 during the session, a 13-month high, before settling at 101.58. This marked the third straight day of dollar strength, driven by expectations of further Fed rate hikes and safe-haven flows amid a tech stock rout. A stronger dollar makes US cotton more expensive for foreign buyers, directly undermining export competitiveness.
At the same time, Brent crude plunged more than $3 to its lowest level since before the Iran conflict, as previously stranded tankers resumed transiting the Strait of Hormuz, easing supply concerns. Lower oil prices not only reduce cotton transportation costs but also make polyester—a key substitute for cotton in textile production—cheaper to produce, siphoning demand away from natural fibers.
Weakening Fundamentals
The rally to 88 cents in mid-May was largely fueled by drought concerns in major US growing regions. However, analyst Sid Love noted that heavy rainfall in late June has improved crop prospects, eroding the weather premium. With no fresh bullish catalysts ahead of the June 30 USDA acreage and stocks report, the market is in a wait-and-see mode.
Export data also paint a cautious picture. In the week ending June 11, 2025/26 net sales were 177,100 bales, down 15% from the prior week, while exports of 251,000 bales fell 16%. With the dollar strengthening, buyers are likely to delay commitments, putting further pressure on prices.
Implications for the Textile Chain
The falling cotton prices have divergent effects along the supply chain. Spinners benefit from lower input costs, though those with high-priced inventory face mark-to-market losses. For fabric and apparel exporters, cheaper cotton improves cost competitiveness, but a stronger dollar partially offsets this advantage—overseas clients pay fewer dollars, but local-currency procurement costs may rise due to exchange rate fluctuations.
Notably, the Cotlook A index fell only 75 points to 87.55 cents on June 24, indicating that physical market adjustments lag futures. This suggests the selloff is more macro-driven than fundamental, and spot supply is not yet abundant.
Key Variables Ahead
All eyes are on the USDA's June 30 acreage and quarterly stocks reports. A higher-than-expected acreage could trigger further selling, while a miss to the downside may provide a floor. Thursday's weekly export sales data will test whether overseas demand is wilting under the strong dollar.
Oil prices remain a wild card. If crude continues to slide as Hormuz traffic normalizes, polyester's substitution effect will intensify, making it difficult for cotton to stabilize around 75 cents.