Cotton Futures Ease as Strong Dollar and Lower Oil Prices Weigh

Cotton futures traded lower on Monday, with contracts easing between 12 and 95 points as the market reacted to a robust US dollar and softer crude oil prices. This decline followed a period of recent gains, with profit-taking activities contributing to the downward pressure.

July 2026 cotton futures settled at 75.21 cents per pound, down 84 points, while the December 2026 contract closed at 79.41 cents per pound, recording a 26-point loss. In the broader commodity complex, crude oil prices fell by another $1.41 per barrel to $75.19. Concurrently, the US Dollar Index (DXY) strengthened, rising by $0.152 to 100.770, approaching its highest levels in 13 months. A stronger dollar typically makes dollar-denominated commodities more expensive for international buyers, thereby dampening demand and prices for cotton.

The latest Crop Progress report released by the U.S. Department of Agriculture (USDA) on Monday afternoon indicated that 92% of the US cotton crop had been planted as of Sunday, June 21. This figure is 2% behind the five-year average pace. The report also showed that 27% of the crop was squared, which is 2% ahead of normal, and 5% was setting bolls, matching the five-year average. Furthermore, the condition ratings for the crop improved, with 53% rated as good/excellent, up 3 percentage points from the previous week.

The downturn in crude oil markets is largely attributed to easing global supply concerns, stemming from advancements in peace talks between the United States and Iran. This development has created a bearish sentiment across other commodity markets, indirectly impacting cotton. Meanwhile, the US dollar continues to gain strength, driven by the Federal Reserve's (Fed) hawkish stance and ongoing expectations for potential interest rate hikes, which further elevates the cost of cotton for non-dollar denominated buyers.

Market analysts suggest that profit-taking in cotton futures may persist in the near term. Data from the Commodity Futures Trading Commission (CFTC) revealed that managed money accounts reduced their net short positions in cotton futures and options by 7,068 contracts, bringing the total to 35,136 contracts. While this indicates some short covering, it also reflects a cautious sentiment among market participants. Looking ahead, US weather patterns, export demand, and forthcoming USDA reports will be crucial factors influencing cotton market dynamics.