Cotton futures saw a brief respite after a prolonged sell-off. On June 25, the ICE December contract rose 0.71 cents to settle at 76.97 cents per pound, recovering from an intraday low of 76.09 cents, the lowest since June 11. The rebound was driven by a confluence of macro and speculative factors, rather than a genuine improvement in industrial demand.
Weak Dollar and Higher Oil Prices Provide Temporary Support
The US dollar index fell after three consecutive days of gains, as inflation and other economic data dampened expectations of a Fed rate hike this year. A weaker dollar makes US commodities cheaper for overseas buyers, providing a marginal boost to cotton. Meanwhile, crude oil rose over 2% on renewed supply concerns following an attack on a cargo vessel near Oman, which raised fears about the resumption of Middle East oil flows. Higher oil prices increase the cost of polyester fibers, indirectly enhancing cotton's competitiveness as a textile raw material.
However, both supports are external and their sustainability is questionable. If the dollar strengthens again or the geopolitical premium fades, cotton prices could quickly give back gains.
Export Data Sounds Alarm: Weak Demand Persists
The USDA's weekly export sales report painted a more realistic picture of supply and demand. For the week ending June 18, net sales of current-crop US upland cotton were 83,864 bales, down 53% from the previous week and 61% below the four-week average. Next-crop sales added 67,089 bales, bringing total net sales to 150,953 bales. While this was above market expectations, shipments remained sluggish at 300,155 bales, up 20% week-on-week but still low year-on-year.
Shipments to China were only 12,248 bales, indicating that Chinese buyers remain reluctant to purchase at current price levels amid ample domestic supply. For textile mills, this suggests that overseas orders have not yet shown a trend recovery, and procurement decisions should remain anchored to actual demand.
Industry Feedback: Mills Stay on the Sidelines
In China's major textile clusters such as Shengze and Nantong, weaving mill operating rates remain low, and gray fabric inventories are slow to clear. Spot cotton trading is thin, with traders offering softer basis quotes, but downstream spinners are sticking to a 'buy-as-needed' strategy with little willingness to build stocks. The Cotlook A index fell 250 points to 85.05 cents per pound, further confirming spot market pressure.
In summary, this rebound is more of a technical correction combined with short-term macro tailwinds. Until export demand improves significantly and the new crop supply outlook becomes clearer, cotton prices are likely to remain range-bound.