Bearish sentiment continued to ferment in the cotton market during the final week of June. The ICE December futures contract hit 75.50 cents per pound on June 26, its lowest since June 11, before settling at 76.38 cents, marking a weekly decline of 4.13%.
Weather Dominates Supply Expectations
Favorable weather across major global cotton-producing regions has been the core driver of this decline. USDA data shows that as of the week ending June 23, approximately 58% of U.S. cotton areas were affected by drought, down sharply from 76% the previous week. This indicates that rainfall in May and June effectively alleviated soil moisture, providing good conditions for cotton entering its critical growth period.
The arrival of the monsoon in India, though slightly delayed, has already covered key cotton areas, eliminating market concerns about drought-related production losses. The simultaneous improvement in weather conditions in the world's two largest cotton producers has directly strengthened expectations for a global production increase in the 2026/27 season.
External Market Linkages Add Pressure
The sharp decline in oil prices is another factor that cannot be ignored. On June 26, U.S. crude oil futures fell 3.7%, recording a significant weekly loss. While the resumption of tanker traffic through the Strait of Hormuz temporarily eased supply disruption fears, the U.S. military's retaliatory strikes against Iran added new uncertainty to the geopolitical landscape.
For the textile industry, falling oil prices directly reduce the production cost of polyester fiber. As the main substitute for cotton, polyester's price advantage will suppress textile mills' willingness to purchase cotton. As market observers have pointed out, oil, as the world's most important commodity, influences synthetic fiber prices, creating an indirect but substantial bearish effect on cotton.
Sentiment and Key Report Preview
From a positioning perspective, ICE-certified cotton stocks fell to 187,250 bales, down 2,197 bales from the previous session, indicating thin spot trading and a lack of active buying support. The weakening U.S. dollar index would normally support dollar-denominated commodities, but this positive factor has been completely offset by strong supply-increase expectations.
The market is now focusing on the USDA's annual acreage report and quarterly stocks report, scheduled for release on June 30. A survey of analysts showed that U.S. corn stocks as of June 1 were expected to be 16.5% higher year-over-year, the highest for that period since 1988. Signals of ample grain supply may further confirm a broadly loose agricultural commodity supply pattern, creating additional pressure on cotton prices.
Industry Impact and Price Outlook
For domestic textile enterprises, the consecutive decline in overseas cotton futures means a significant reduction in imported cotton costs. The Cotlook A index stood at 85.80 cents per pound on June 26, up 75 points for the day. However, the divergence between firm spot indices and weak futures reflects a tug-of-war between short-term spot holders' willingness to support prices and long-term bearish sentiment.
From an industry chain perspective, falling cotton prices benefit weaving and apparel companies by reducing raw material costs. However, sustained declines may also trigger wait-and-see behavior among downstream customers, delaying orders. For traders and ginners holding cotton inventories, current prices are approaching cost levels, and selling pressure is building.