U.S. cotton condition ratings dropped sharply by 5 percentage points to 48% in the week ending June 28, yet the June 29 ICE cotton session saw only a modest 0.07-cent gain in the December contract. The market's focus has quickly shifted to the upcoming USDA acreage report, while rising oil prices from Middle East geopolitical tensions and a weakening U.S. dollar are providing underlying support.
Background
The U.S. Department of Agriculture reported that cotton condition ratings fell from 53% to 48%, below last year's 51% level, marking the steepest weekly decline this growing season, primarily due to drought in Texas. Planting progress reached 97%, essentially completing the season, but the final acreage figure will be released in the USDA report on June 30.
Geopolitical risks added to the mix. Attacks between the U.S. and Iran in the Persian Gulf pushed Brent crude oil up over 1%, raising polyester production costs—a key cotton substitute. Higher polyester prices typically encourage mills to shift toward cotton, offering indirect support. The U.S. dollar index fell for a third consecutive session, making dollar-denominated commodities cheaper for overseas buyers.
Industry Impact
For China's cotton textile chain, ICE cotton fluctuations directly affect import costs. The Cotlook A index stood at 85.30 cents/lb on June 29, down 50 points from the previous day, keeping foreign cotton near a three-month low. However, if the USDA acreage report shows planted area below expectations (analysts had forecast a slight increase), foreign cotton could see a short-term rally, lifting landed costs under the 1% tariff regime.
Domestically, Zhengzhou cotton futures have been trading in a narrow range, with downstream mills adopting a cautious stance. June marks the traditional off-season for textile demand, with yarn inventories slowly building and weaving mill operating rates declining modestly. If foreign cotton strengthens due to deteriorating conditions, domestic prices may find cost-side support, but weak end-user demand will cap upside.
Speculative net long positions on ICE cotton increased by 7,247 contracts to 58,252 in the week ending June 23, indicating bullish short-term sentiment. Yet the global production estimate of 119.27 million bales for 2026/27 remains historically high, leaving the medium-to-long-term supply outlook loose.