Cotton Futures Slip Lower on Friday Amid Rising Oil Prices

Global commodity markets experienced a mixed performance last Friday, with cotton futures continuing their downward trend. Following significant losses on Thursday, cotton futures contracts saw further weakness, declining between 62 and 89 points across most contracts during the day. December cotton contracts recorded a weekly drop of 291 points. Although some losses were pared by midday, the overall selling pressure persisted in the market.

This movement in the cotton market coincided with a slight increase in the US Dollar Index and a notable surge in crude oil prices. West Texas Intermediate (WTI) futures rose by 81 cents per barrel to $79.76 on Friday, while Brent crude futures gained 70 cents, reaching $84.93 per barrel. Overall, crude oil registered an increase of over $3.50 per barrel compared to the previous trading session. Meanwhile, the US Dollar Index (DXY) showed a modest uptick of 0.011 points, trading around the 100.74 level.

The US Department of Agriculture (USDA) weekly export sales report provided key insights into the cotton market. As of July 9, old crop cotton commitments stood at 11.951 million running bales (RB). While this figure represents 102% of the USDA's export projection, it lags behind the performance of the past few years. Net sales of Upland cotton for the 2025/2026 marketing year totaled 34,400 RB, marking a marketing-year low, down 48% from the previous week and 64% below the prior four-week average. Export shipments accumulated to 10.398 million RB, accounting for 88% of the USDA target, falling short of the 93% recorded at the same time last year.

The decline in cotton prices can be attributed to factors such as a weaker global demand outlook and increased cotton exports from Brazil to Asian markets. Conversely, rising oil prices, driven by geopolitical tensions in the Middle East, and a slightly stronger US dollar, contribute to an overarching sense of uncertainty in commodity markets. The increase in oil prices could indirectly impact agricultural production and transportation costs by raising overall energy expenses.

Analysts suggest that selling pressure in the cotton market may continue in the short term. Technical indicators from the December cotton contracts' declines point to potential further speculative selling interest early next week. However, weather-related supply risks, such as below-average monsoon rainfall in India, and ongoing geopolitical tensions, could provide support for cotton prices in the longer term. Broadly, developments in global economic growth expectations, interest rates, and energy prices will play a critical role in determining the future trajectory of commodity markets.