Today Markets Analysis: Cotton futures came under renewed pressure Monday as the market weighed improving US crop conditions, advancing harvest activity and a firmer US dollar against signs that physical cotton supplies remain relatively tight.

The October contract fell 174 points to 80.64 cents per pound, while December cotton dropped 151 points to 84.55 cents. March 2027 futures also weakened, closing 144 points lower at 87.12 cents.

The decline came despite crude oil rising $1.84 per barrel, an important factor for cotton because higher energy prices can increase production and transportation costs. The stronger dollar, however, provided a more direct headwind by making US agricultural commodities less competitive internationally.

US Crop Progress Points to Increasing Supply

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

More importantly for the market, crop conditions improved.

The share of the crop rated good or excellent rose to 36%, up two percentage points from the previous week. The Brugler500 index was unchanged at 298, although the percentage rated poor or very poor increased by two points.

The numbers suggest the US crop is continuing to move toward harvest with conditions broadly stable to improving.

That creates a growing supply narrative for traders, particularly if favourable weather allows more cotton to reach harvest without significant quality losses.

Certified Stocks Remain a Counterweight

The supply picture is not entirely bearish.

ICE-certified cotton stocks fell by 3,164 bales on September 11, leaving certified inventories at just 38,462 bales.

That remains a relatively tight level of immediately deliverable exchange-certified cotton and provides an important counterweight to the improving US crop outlook.

The Cotlook A Index also increased 100 points to 98.20 cents per pound on Friday, indicating that physical-market pricing remains considerably firmer than the futures market.

The divergence between futures weakness and physical-market values is something traders will be watching closely.

Dollar Strength Adds Pressure

The US Dollar Index gained 0.609 points Monday.

For a US-exported commodity such as cotton, a stronger dollar can become a headwind because it raises the effective cost for overseas buyers using other currencies.

This is particularly relevant as the cotton market enters a period when export demand must compete with increasing availability from the US harvest.

For international buyers, the currency component can therefore influence purchasing decisions even when underlying physical demand remains steady.

Adjusted World Price Falls

The Adjusted World Price was reduced by 441 points from the previous week to 69.51 cents per pound.

The lower AWP adds another indication that global pricing conditions remain challenging despite the tightness visible in ICE-certified stocks.

The market is therefore caught between two opposing forces: near-term physical tightness and the prospect of increasing US supply as harvest accelerates.

Cotton Futures

The futures curve continues to price higher levels further out, with March 2027 trading roughly 6.5 cents above October.

That structure suggests traders are not pricing an immediate collapse in cotton values, even though nearby contracts are facing harvest-related pressure.

What Traders Are Watching Next

The next phase of the cotton market will depend heavily on whether the improving US crop narrative translates into actual harvested supply.

Key factors include:

• US harvest progress and whether favourable weather accelerates fieldwork.
• Crop condition revisions as the harvest approaches.
• ICE-certified stocks, which remain historically important at current levels.
• US export demand as international buyers assess competing origins.
• The US dollar, particularly if broader monetary policy expectations continue supporting the currency.
• Crude oil prices, which influence production costs and the relative economics of cotton versus competing crops.

A sustained improvement in US harvest data could keep pressure on nearby futures. Conversely, continued tightness in certified stocks or stronger export demand could limit the downside.

Currency Hedger View

For global cotton merchants, textile manufacturers and other participants with exposure to US-dollar-denominated commodity purchases, the currency market is becoming an increasingly important part of the equation.

The stronger US dollar is currently working against cotton futures, but its impact extends beyond the futures market. Importers purchasing cotton in dollars can see their effective procurement costs rise even when the underlying commodity price is falling.

This creates a situation where cotton price risk and FX risk need to be considered together.

Currency Hedger, the FX division of Octalas Group, sees currency exposure as an important variable for businesses managing international commodity purchases, particularly where contracted cotton prices and settlement dates extend across several months.

Today Markets View

Monday’s decline looks more like a market adjusting to the approaching US harvest than a fundamental breakdown in cotton demand.

The improvement in crop conditions and growing harvested acreage provide a credible reason for futures to come under pressure, while the stronger dollar adds another layer of resistance.

However, ICE-certified stocks of only 38,462 bales show that the physical market is not awash with readily deliverable cotton.

The key question is therefore whether incoming harvest supply can overwhelm that tightness.

If harvest conditions remain favourable, cotton could face further pressure in the near term. But if export demand strengthens or physical stocks remain constrained, the downside may prove limited.

“Cotton is entering the point in the cycle where expectations of new supply begin to compete directly with physical-market tightness. The next few weeks of harvest and export data will be critical in determining which side ultimately wins.” — Louis Roche, Analyst, Today Markets

Bottom Line

Cotton futures started the week under pressure as US harvest progress, improving crop conditions and a stronger dollar outweighed the supportive influence of higher crude oil and still-low certified stocks.

The market is approaching a critical transition: from concerns about available supply toward the reality of the new US crop.

For now, the bias is cautious, but 38,462 bales of ICE-certified stocks means the supply picture is far from comfortable.

The next major signal will come from the pace and quality of the US harvest — and whether international demand is strong enough to absorb the additional supply.

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.