On June 26, the ICE cotton futures December 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 level since June 11. The contract posted a weekly decline of 3.29 cents, or 4.13%, marking its worst weekly performance in nearly a month.
Weather and Drought Data Reversal
Growing conditions across major cotton-producing regions are shifting from tight to loose. The latest U.S. Drought Monitor data from the USDA shows that as of the week ending June 23, approximately 58% of U.S. cotton areas were affected by drought, down sharply from 76% the previous week. This 18-percentage-point drop in just one week indicates a significant easing of moisture stress. Rogers Varner, president of Varner Brokerage, noted that rainfall in May and June has been ample and favorable for the U.S. cotton harvest.
Although the Indian monsoon arrived slightly late, it has now reached the main cotton-growing regions. The coverage and intensity of monsoon rains will directly impact India's new-crop planting progress and yield expectations. Overall, the uncertainty on the supply side of global cotton is diminishing, and the market's expectation of a bumper harvest is strengthening, which is the core fundamental factor weighing on futures prices.
Crude Oil Decline Transmits to Fiber Substitution
International crude oil prices recorded a significant weekly drop, with U.S. crude falling 3.7% on June 26 alone. Lower oil prices directly reduce the production cost of polyester fiber, the main substitute for cotton in textile raw materials. Varner stated that oil, as the world's most important commodity, indirectly but clearly pressures cotton prices through its impact on synthetic fiber costs.
For textile mills, this transmission chain means that as cotton prices weaken due to lower oil prices, the relative cost-effectiveness of chemical fibers improves. Procurement teams need to reassess the cost differences between cotton and alternatives such as polyester and viscose, especially in a context where end-user demand has yet to recover significantly, making cost control a key operational priority.
Key Reports and Inventory Signals
The market's current focus is on the USDA's annual Acreage and Quarterly Stocks reports, scheduled for release on June 30 (00:00 Beijing time on July 1). These reports will provide critical clues on supply estimates for major U.S. agricultural commodities. Analyst surveys indicate that as of June 1, U.S. corn stocks are expected to be 5.408 billion bushels, up 16.5% year-on-year and the highest for that date since 1988. High corn inventories often suggest that planted acreage may shift to other crops, but the specific impact on cotton acreage remains to be confirmed by the report.
Meanwhile, ICE deliverable stocks of No. 2 cotton futures fell to 187,250 bales as of June 25, down from 189,447 bales the previous session. The continued decline in deliverable stocks suggests reduced physical delivery appetite, but futures prices have not found support from this, indicating that the market is more focused on the pressure of increased future supply.
Industry Impact and Operational Recommendations
The impact of this round of cotton price declines on the textile industry chain is divergent: upstream ginners face pressure to lower seed cotton purchase prices, while midstream spinners gain a window of opportunity for lower raw material costs. However, it is important to note that the current price weakness is not demand-driven but results from improved supply expectations and the price advantage of substitutes. If the June 30 USDA report confirms that U.S. cotton acreage is higher than expected, cotton prices could fall further.