Global cotton markets experienced a notable bearish sentiment in the final week of June. The ICE December cotton futures contract hit a more than two-week low of 75.50 cents per pound on June 26, eventually settling at 76.38 cents, marking a 4.13% weekly decline. This downturn is driven by the convergence of two key factors: favorable weather and falling oil prices.
Weather Improvement: Growing Supply Pressure
From the supply side, weather conditions across major global cotton-growing regions are turning increasingly favorable for production. In the United States, data from the USDA's Office of the Chief Economist shows that as of the week ending June 23, only about 58% of U.S. cotton areas were affected by drought, a sharp drop from 76% the previous week. This means that within just one week, nearly 20% of producing regions have been relieved from drought stress, directly boosting yield expectations as the crop enters its critical growth phase.
Although India's monsoon arrived slightly late, it has now reached the subcontinent, and overall precipitation is considered sufficient to support cotton sowing and early growth. The consensus of 'favorable weather' across global producing regions has become the most fundamental factor currently suppressing cotton prices. For downstream spinning mills and traders, this implies potential downside in forward procurement costs, and a wait-and-see attitude is spreading through the supply chain.
Oil Price Decline: Indirect Bearish Transmission
On the external market front, crude oil prices fell more than 3% on June 26, recording a significant weekly loss. The direct trigger was the resumption of tanker traffic through the Strait of Hormuz, alleviating supply disruption fears following a previous attack on a merchant vessel near Oman. However, the deeper impact lies in the fact that lower oil prices directly reduce the production cost of polyester fiber, making cotton relatively less competitive against synthetics.
As industry veterans analyze, oil, as the world's most critical commodity, indirectly influences the cotton market through the synthetic fiber channel. When oil prices fall, the cost advantage of alternatives like polyester increases, prompting textile mills to favor chemical fibers in their raw material mix, thereby suppressing actual cotton demand. This 'energy-synthetic-cotton' linkage is particularly sensitive in the current environment of squeezed profit margins across the global textile industry.
Market Focus Shifts to USDA Acreage Report
Amid the continuous price weakness, market investor attention is highly focused on the USDA's annual acreage and quarterly stocks report, scheduled for release on June 30. This report will provide crucial data on actual planted acreage for major U.S. agricultural products in 2026, serving as a key basis for judging the second-half supply picture.
- Analysts on average expect U.S. corn stocks as of June 1 to be 5.408 billion bushels, up 16.5% year-on-year, the highest for that date since 1988.
- Although corn data is not directly part of the cotton report, corn and cotton compete for land in major U.S. producing regions. High corn inventories could imply adjustments in its planted area, indirectly influencing the final cotton acreage figure.
Additionally, ICE data shows that as of June 25, deliverable stocks of No. 2 cotton futures fell to 187,250 bales, down from the previous day, reflecting some degree of spot market acceptance of current prices, though this has not reversed the overall weakness in the futures market.
Spot Market: Index Rises Slightly but Trend Remains Weak
In the spot market, the Cotlook A index on June 26 stood at 85.80 cents per pound, up 75 points from the previous day. This modest increase in spot prices briefly diverged from the futures decline, but given the dominant role of futures in pricing forward expectations, the sustainability of this divergence is questionable. For traders holding inventory, managing risk exposure takes priority over chasing price increases at this stage.