A brief pullback in the US dollar index, combined with technical buying, propelled ICE cotton futures into a rebound on June 25. The most-active December contract settled at 76.97 cents per pound, up 0.71 cents or 0.93% from the previous session. Earlier in the session, the contract had fallen to 76.09 cents, its lowest since June 11. For textile mills, the fact that cotton found support near 76 cents is noteworthy — it suggests that the near-term downside for upstream costs may be limited and that the purchasing window could be narrowing.
Currency and Oil Linkages
The weaker dollar was the immediate catalyst. On June 25, the dollar index ended a three-day winning streak after US inflation and other economic data tempered expectations for a Fed rate hike this year. A weaker dollar makes dollar-denominated cotton cheaper for overseas buyers, which can help support export demand. Adding to the bullish sentiment, international crude oil prices rose about 2% on the day, driven by renewed geopolitical uncertainty over Middle East supply recovery. Higher oil prices lift the cost of polyester, a cotton substitute, potentially shifting some downstream orders toward natural fiber. This cross-commodity price linkage has become increasingly pronounced in recent textile raw material markets.
Export Data Raises Concerns
The USDA's weekly export sales report for the week ended June 18 showed net sales of 83,864 running bales for the current marketing year, down 53% from the prior week and 61% below the four-week average. Sales for the 2025/26 season totaled 67,089 bales. Total shipments reached 300,155 bales, up 20% week-over-week but still relatively weak on a year-over-year basis. Shipments to China were just 12,248 bales, indicating tepid buying interest from the world's largest importer. Combined old-crop and new-crop sales of 150,953 bales fell short of market expectations. The sluggish export data underscores that while cotton prices have found technical support, substantive demand has yet to recover materially. Mills and traders need to monitor the pace of downstream order resumption.
Spot Market Under Pressure
On the spot side, the Cotlook A index fell 250 points to 85.05 cents per pound on June 25. The persistent weakness in spot prices reflects cautious purchasing by spinning mills and slow inventory destocking. Whether the futures rebound can stabilize the spot market will depend on whether major importers like China and Vietnam increase their fixing activity at current levels.
Industry Impact and Outlook
From a supply-chain perspective, the technical rebound near 76 cents in ICE cotton is more of a short-term correction driven by fund flows and sentiment rather than a reversal in fundamental supply-demand dynamics. The dollar remains the key near-term variable. If the dollar index strengthens again, cotton prices could come under renewed pressure. For domestic Chinese textile enterprises, the focus should be on two factors: the spread between domestic and international cotton prices, and the pace of inventory digestion in downstream gray fabric and finished fabric sectors. Without a meaningful pickup in end-user orders, the upside for upstream raw material prices will be capped.