Cotton Futures Hold Near 84 Cents as US Crop Progress, Oil Prices and Dollar Set Market Direction

Today Markets Analysis: US cotton futures were mixed on Tuesday, with the nearby October contract edging higher while deferred contracts moved lower as traders balanced improving US crop conditions against rising energy costs and currency-market pressure.

October cotton settled at 81.10 cents per pound, up 46 points, while December fell 7 points to 84.48 cents and March 2027 declined 13 points to 86.99 cents.

The market is being pulled between improving evidence of US crop development and several external factors that could influence demand and production economics, including higher crude oil prices and a firmer US dollar.

Cotton Futures Show Mixed Performance

The cotton market remains relatively divided across the futures curve.

October cotton posted a modest gain, while December and March contracts declined. The difference suggests traders are assessing near-term supply conditions separately from expectations further into the marketing year.

The latest US Crop Progress data showed that 57% of the US cotton crop had reached the boll-opening stage as of Sunday, while 8% had been harvested.

Crop conditions also improved, with 36% of the crop rated good or excellent, up two percentage points from the previous week.

However, the improvement was not uniform. Poor and very poor ratings also increased by two percentage points, leaving the Brugler500 index unchanged at 298.

Bullish Sentiment

Several factors could provide support for cotton prices.

• Improving crop conditions remain uneven: Although good/excellent ratings increased, poor/very poor ratings also rose.
• Harvest progress is still limited: Only 8% of the US crop had been harvested, leaving production exposed to weather and field conditions.
• Higher crude oil prices: Rising energy costs can increase agricultural production, transportation and processing expenses.
• Lower Adjusted World Price: The AWP declined to 69.51 cents/lb, potentially affecting the economics of US cotton.
• Certified stocks remain relatively contained: ICE certified stocks were steady at 38,462 bales.

Bearish Sentiment

The market also faces several factors that could restrict upside.

• US crop development is progressing: With 57% of the crop at the boll-opening stage, the market is receiving greater visibility on potential supply.
• Harvesting has begun: The 8% harvested figure confirms that new-crop supply is beginning to enter the market.
• Stronger US dollar: A firmer dollar can make US cotton less competitive for international buyers.
• Lower Cotlook A Index: The Cotlook A Index declined 205 points to 96.15, signalling softer international benchmark pricing.
• Deferred contracts are weaker: December and March futures both closed lower, indicating some caution further along the curve.

US Crop Progress Becomes the Key Supply Indicator

The US crop is entering an increasingly important stage.

With 57% of the crop showing opened bolls and 8% already harvested, traders are gaining greater visibility on eventual production.

The improvement in good/excellent ratings provides a constructive supply signal, but the simultaneous increase in poor/very poor ratings highlights continued variation across growing regions.

The next several crop-progress reports will therefore be closely watched for evidence of whether improving conditions translate into stronger production expectations or whether weather and field conditions create further uncertainty.

Crude Oil Adds Pressure to Cotton Production Costs

Crude oil rose $4.09 per barrel during the session, adding another variable to the cotton market.

Higher energy prices can increase costs throughout the agricultural supply chain, including fuel, transportation, machinery operation and processing.

This can provide a degree of fundamental support for commodity prices, although the effect on cotton is not necessarily immediate. If higher energy prices also contribute to broader inflation and a stronger dollar, demand conditions could become more complicated.

The US Dollar Remains Important for Export Demand

The US dollar index also increased during the session, rising 0.249 points.

Because cotton is traded internationally in US dollars, currency movements can influence the purchasing power of overseas buyers. A stronger dollar can make US-origin cotton more expensive in local-currency terms, potentially creating a headwind for export demand.

This makes the relationship between cotton and the dollar particularly important as traders assess international demand alongside the developing US crop.

International Cotton Prices Signal Caution

The Cotlook A Index fell 205 points to 96.15 on September 14, providing another indication that international cotton pricing remains under pressure.

The Adjusted World Price also declined 441 points to 69.51 cents per pound.

The divergence between futures prices and international benchmarks will be important for traders because it can influence the relative competitiveness of US cotton and the economics of physical trade.

What Traders Are Watching Next

The cotton market is entering a period where supply visibility should increase rapidly.

Traders will be watching:

• Further increases in the US harvested percentage.
• Whether good/excellent crop ratings continue improving.
• Whether poor/very poor ratings continue to rise.
• Changes in the Brugler500 crop index.
• ICE certified stock levels.
• The direction of the Cotlook A Index and Adjusted World Price.
• Crude oil prices and their effect on production costs.
• US dollar movements and international cotton demand.
• Whether December cotton can maintain the 84-cent area.

Currency Hedger View

For cotton producers, exporters and international textile businesses, the combination of commodity-price volatility and US dollar movements creates an additional layer of financial risk.

A stronger dollar can affect the competitiveness of US cotton exports, while volatile energy prices can alter transportation and production costs. Businesses with cross-border cotton exposure therefore need to consider both cotton-price risk and currency risk when managing forward revenues and costs.

Currency Hedger — www.currencyhedger.com

Market analysis contributed by Currency Hedger, an Octalas Group division specialising in foreign exchange, currency risk and hedging.

Today Markets View

Cotton is currently being pulled between improving US crop visibility and a more complicated macroeconomic backdrop.

The increase in good/excellent crop ratings and the beginning of harvest provide evidence that supply is progressing, but the simultaneous rise in poor/very poor ratings means the crop picture remains uneven.

Meanwhile, stronger crude oil prices could increase production costs, while a firmer US dollar and weaker international benchmarks may create pressure on export competitiveness.

“Cotton is moving into a critical transition period as the US harvest begins to provide clearer evidence of available supply. Improving crop conditions are a bearish influence, but uneven ratings, higher energy costs and currency movements are preventing the market from developing a straightforward direction.” — Louis Roche, Analyst, Today Markets

Bottom Line

Cotton futures were mixed, with October settling at 81.10 cents, while December closed at 84.48 cents and March 2027 at 86.99 cents.

The bullish case is supported by limited harvest progress, uneven crop conditions, higher crude oil prices and the potential for continued supply uncertainty.

The bearish case centres on improving crop development, the beginning of the US harvest, a stronger dollar and softer international cotton benchmarks.

The next major signal will come from US crop-progress data and the pace of harvesting, while crude oil, the dollar and international cotton prices will remain important secondary drivers.

Analysis by Louis Roche, Analyst, Today Markets

Market analysis contributed by Currency Hedger, an Octalas Group division specialising in foreign exchange, currency risk and hedging.

Currency Hedger — www.currencyhedger.com

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