International cotton prices saw a modest rebound at the end of June, but the monthly performance still recorded a 3.51% decline. The sharp volatility in crude oil markets and abnormal weather in major Northern Hemisphere cotton-producing countries are introducing new uncertainties into the cotton supply chain. For textile companies, the pressure on raw material costs has not been alleviated; instead, it is showing a more complex transmission path.
Planting Area Exceeds Expectations, Supply Loosening Expectations Rise
The USDA's planting report released at the end of June showed that all US cotton planting area for 2026 is estimated at 9.85 million acres, higher than the market's previous estimate of 9.636 million acres and up 6.1% from the actual 2025 planting area of 9.283 million acres. This data directly broke market expectations of supply tightening.
The unexpected expansion in planting area means that under normal weather conditions, new crop US cotton production will increase significantly. StoneX Senior Vice President Bailey McHenry noted before the report's release that the market generally expected the area to be higher than previous estimates, but the actual number still clearly exceeded the upper limit. This indicates that US cotton farmers are relatively optimistic about forward price expectations, possibly due to the relatively high cotton prices in the earlier period.
Crude Oil Plunge Drags Cotton Prices, Macro Pressure Persists
Although the planting report itself was bearish, the core driver of June's cotton price decline came from the external macro environment. International oil prices recorded their largest monthly and quarterly declines since the COVID-19 pandemic began in early 2020, directly dragging down the cotton market, which is linked to energy prices.
The sharp decline in crude oil prices, on the one hand, lowered the production cost of chemical fiber substitutes, narrowing cotton's cost-performance advantage among textile raw materials. On the other hand, it also reflected expectations of a slowdown in global economic growth, thereby suppressing demand for end-use textile products. McHenry stated bluntly that the market experienced a technical correction this month while also facing pressure from the overall decline in oil prices. This dual blow made it difficult for cotton prices to form an effective rebound in June.
Climate Anomalies: US Cotton Condition Ratings Fall, Indian Monsoon Delayed
On the supply side, the variable is not just the increase in area. The USDA's weekly crop progress report showed that as of June 28, the US cotton condition rating dropped from 53% to 48%, lower than the 51% during the same period last year. Although planting progress has reached 97%, nearing completion, the continued decline in condition ratings suggests that yields may fall short of expectations, partially offsetting the production increase from the larger area.
Meanwhile, India is experiencing its driest June in over a decade. Insufficient rainfall due to a delayed monsoon has slowed the planting progress of summer crops such as rice, corn, cotton, and soybeans. As one of the world's largest cotton producers, a delay in Indian cotton planting will directly affect the 2026/27 crop production. If the replanting window closes, the risk of production cuts will increase significantly.
Short-Term Weak and Volatile, Procurement Strategy Needs to Shift to Defense
Overall, the current cotton market is in a pattern of conflicting factors: the expansion of planting area creates expectations of looser supply, but climate risks pose hidden dangers to production. While crude oil's plunge suppresses cotton prices, a rising US dollar index further increases procurement costs for non-US buyers.
For textile companies, cotton prices are likely to maintain a weak and volatile trend in the short term, but downside potential is limited. It is recommended that buyers adopt a demand-driven procurement strategy, shorten inventory cycles, and avoid passive stockpiling during price fluctuations. At the same time, closely monitor weather changes in major US cotton-producing regions and the progress of the Indian monsoon. If extreme weather events occur, cotton prices could rebound rapidly.