The global cotton market experienced a notable correction in the final week of June, driven by improved weather in major producing regions and external energy market volatility. On June 26, ICE December cotton futures fell to 75.50 cents per pound, the lowest since June 11, settling at 76.38 cents, marking a weekly decline of 4.13%.
Weather Factor: Rising Supply Pressure
Weather conditions across key cotton-producing areas have turned generally favorable. In the United States, although about 58% of cotton areas were still affected by drought as of June 23, this was a significant improvement from 76% the previous week, indicating that rainfall has effectively alleviated dry conditions. Market participants noted that May and June rainfall has been quite beneficial for US cotton yields. Meanwhile, India's monsoon, though delayed, has arrived and covers major planting regions. The improved weather in both top producers directly boosted expectations for higher new-crop supply, pressuring futures prices.
Falling Oil Prices: Indirect Bearish Transmission
International oil prices plunged over 3% on June 26, with significant weekly losses. Lower oil prices reduce polyester production costs, and as a major substitute for cotton, polyester's price advantage weakens cotton demand. Industry analysis suggests that energy price fluctuations exert a clear but indirect bearish impact on cotton through the synthetic fiber channel. External markets currently show a mild negative sentiment toward cotton, and this transmission chain is unlikely to reverse in the short term.
Grain Market Linkage and Report Outlook
Grain markets were mixed: corn and soybeans fell due to expanding high temperatures in the US Midwest, while wheat declined on harvest pressure. Investors are closely watching the USDA's annual acreage and quarterly stocks report due June 30, expected to provide key guidance for supply outlooks across commodities including cotton. ICE data showed deliverable cotton stocks fell to 187,250 bales as of June 25, indicating some tightening in physical market inventories.
Impact on Textile Supply Chain
Short-term cotton price weakness presents both challenges and opportunities for textile mills. Lower raw material costs help ease profit pressure, but increased volatility demands more precise procurement timing. For yarn and fabric producers, current price levels may signal a replenishment window, but caution is warranted if the USDA report proves ultra-bearish, potentially driving prices lower. Foreign trade firms must monitor currency-commodity linkages; a weakening US dollar may partially offset cost advantages from lower cotton prices.