The 76 cents per pound level is becoming a battleground for cotton bulls and bears. On June 25, ICE cotton futures hit a two-week low of 76.09 cents before rebounding sharply, with the December contract closing at 76.97 cents, up 0.71 cents or 0.93%. This move indicates strong bargain-hunting interest and technical support forming at current levels.
Weaker Dollar and Bargain Buying Provide Dual Support
The US dollar index fell after three consecutive days of gains, providing crucial support for dollar-denominated cotton. Fresh US inflation data weakened expectations for a Fed rate hike this year, pressuring the greenback. For overseas buyers holding non-dollar currencies, this means lower import costs, potentially stimulating actual demand. Meanwhile, StoneX senior vice president Bailey McHenry noted that the previous day's sharp sell-off triggered technical repositioning by speculative funds, with buyers showing increased willingness to enter at current prices. This 'sharp drop then rebound' pattern often signals the market is seeking a new equilibrium.
USDA Export Sales: Net Sales Slump, but Shipments Recover
The USDA's June 25 export sales report offered another set of key signals. For the week ending June 18, current-year US upland cotton net sales were 83,864 running bales, down 53% from the previous week and 61% from the prior four-week average. Next-year net sales were 67,089 bales. However, shipments reached 300,155 bales, up 20% from the previous week and only 16% below the four-week average. The sharp drop in net sales reflects cautious new orders, but the rebound in shipments shows that earlier orders are still being executed smoothly. Shipments to China were 12,248 bales, indicating the Chinese market is still buying on a need-to basis. This pattern of 'slow new orders, steady old orders' puts some short-term pressure on prices but also means inventories are being effectively drawn down.
Oil Price Volatility and the Substitution Effect Return to Focus
International oil prices rose about 2% on the day, driven by renewed concerns over the timeline for restoring Middle East oil supply after a cargo ship was attacked off Oman. Crude oil prices have an indirect but important link to cotton: oil is the main feedstock for polyester fiber, and higher oil prices raise the cost of man-made fibers, enhancing cotton's relative price competitiveness. The current uncertainty in the Middle East is transmitting through energy costs to textile raw materials. For spinners, this means the price gap between chemical fibers and cotton could narrow again, influencing blending ratios. For buyers, monitoring this transmission chain is critical, as sustained higher oil prices will gradually highlight cotton's substitution advantage.
Industry Impact: Finding Direction in Short-Term Volatility
In summary, the cotton market is currently in a volatile range with conflicting factors. The dollar trend, export data, oil price fluctuations, and technical buying collectively define the short-term price boundaries. The 76-cent level has confirmed strong support, but the 78-80 cent range faces selling pressure. For Chinese textile mills, the stabilization of international cotton prices at current levels means import costs will not spike sharply in the near term, but neither will they fall significantly. It is recommended that buyers maintain a hand-to-mouth procurement pace and avoid chasing rallies or selling into breaks.