US cotton acreage expansion combined with crude oil slump puts double pressure on cotton market
The U.S. Department of Agriculture's planting report released on June 30 showed that all U.S. cotton planting area in 2026 is expected to be 9.85 million acres, not only higher than the market estimate of 9.636 million acres but also significantly higher than the actual planted area of 9.283 million acres in 2025. This above-expected data directly suppressed market sentiment. Although the ICE cotton futures main contract for December edged up 0.46% to 76.8 cents per pound on the day, the monthly line still recorded a 3.51% decline.
Planting area exceeds expectations, sending bearish signals
Exceeding expectations in planting area means that U.S. cotton production is likely to increase significantly in the new season. StoneX senior vice president Bailey McHenry pointed out that the market had been in a range-bound pattern before the report, and the actual data exceeding expectations further confirmed the expectation of loose supply. For textile enterprises, this means raw material procurement costs may continue to face downward pressure, but they also need to be cautious of the risk of rebound from lows.
In terms of growth progress, as of the week ending June 28, the U.S. cotton good-to-excellent rate fell from 53% to 48%, lower than 51% in the same period last year. The planting rate has reached 97%, slightly faster than 95% last year and close to the five-year average of 97%. The decline in the good-to-excellent rate may affect yields, but the overall area expansion still makes the total production outlook relatively optimistic.
Crude oil plunge drags down commodity sentiment
International oil prices recorded their largest monthly and quarterly declines since the COVID-19 pandemic in early 2020, directly dragging down the monthly performance of cotton futures. McHenry said the market experienced a technical correction this month while also facing pressure from the overall decline in oil prices. As the bellwether of commodities, crude oil price declines often drag down the entire commodity sector, and cotton is no exception.
The U.S. dollar index rose simultaneously, putting additional pressure on dollar-denominated cotton. In the stock market, the S&P 500 and Nasdaq ended June trading with their largest quarterly gains since 2020, showing a trend of capital shifting from commodities to risk assets.
India drought disrupts global supply pattern
India recorded its driest June in over a decade, with delayed monsoon progress and insufficient rainfall slowing the planting of summer crops such as rice, corn, cotton, and soybeans. As the world's second-largest cotton producer, India's cotton planting area and production expectations may be revised downward, which could to some extent offset the supply pressure from U.S. cotton production increases.
However, in the short term, the market is more focused on the bearish effect of U.S. cotton acreage expansion. The Cotlook A Index stood at 85.30 cents per pound on June 30, unchanged from the previous day, reflecting a strong wait-and-see sentiment in the spot market.