ICE cotton futures recorded a fourth consecutive day of decline on June 24, with the most-active December contract settling at 76.26 cents per pound, down 3.14% on the day. The nearby July contract also weakened, closing at 73.96 cents per pound, down 1.25 cents. The sell-off was driven by two macroeconomic forces: a strengthening US dollar and a sharp drop in crude oil prices.
Macro Pressure: Dollar Hits 13-Month High, Oil Falls Over $3
The US dollar index touched 101.8 on June 24, the highest since May 12, 2025, and closed up 0.19% at 101.58. This marked the third straight day of gains for the greenback. Market expectations of further Federal Reserve rate hikes, combined with risk aversion triggered by a sell-off in tech stocks, have driven capital into dollar-denominated assets. For international cotton priced in dollars, a stronger dollar directly raises purchasing costs for non-US buyers, dampening demand elasticity.
Meanwhile, global benchmark crude oil prices plunged over $3 per barrel on the same day, closing at their lowest level since the outbreak of the Iran war. The supply disruption fears that had built up around the Strait of Hormuz eased as more previously stranded tankers departed the area. Lower oil prices reduce the production costs of polyester, a key substitute for cotton, potentially further squeezing cotton demand.
Fundamentals: Weak Export Data, Market Awaits USDA Reports
Beyond the macro headwinds, cotton's own fundamentals offered little support. USDA export sales data for the week ending June 11 showed net sales of 2025/26 crop cotton at only 177,100 bales, down 15% from the previous week. Export shipments totaled 251,000 bales, a 16% decline week-over-week. The sluggish export data reflects cautious buying sentiment among overseas buyers amid the current price environment.
Market attention is now focused on the USDA's acreage and stocks report due on June 30. This report will provide critical clues about the supply outlook for the new crop. A Kansas-based commodity analyst noted that before June 30, if heavy rainfall arrives in drought-affected areas, the prospects for the new crop will become clearer, potentially providing some support for cotton prices. Until then, the market is likely to remain range-bound.
Industry Transmission: How Raw Material Volatility Affects Downstream Procurement
The consecutive decline in cotton prices has had a direct psychological impact on the downstream textile supply chain. From Shengze to Keqiao and Nantong, fabric and garment enterprises have generally slowed their raw material procurement pace. Many have adopted a "hand-to-mouth" buying strategy to avoid building inventories during a downward price channel. This wait-and-see attitude has, in turn, exacerbated thin trading in the physical market.
Notably, the Cotlook A Index stood at 87.55 cents per pound on June 24, down 75 points. Although the decline in physical prices was less severe than in futures, the direction was consistent, indicating that international cotton merchants are also proactively lowering their offers to align with the futures market's decline. For Chinese textile companies that rely on imported cotton, changes in the yuan-dollar exchange rate will be another variable to watch—a stronger dollar means that the actual reduction in import costs may be smaller than the decline in futures prices.