Key Highlights

  • Cotton futures fell toward 80 cents per pound after reaching a one-month high of 81.2 cents on July 7.
  • A stronger US dollar, driven by renewed Middle East tensions, made dollar-denominated cotton more expensive for buyers.
  • Adverse weather in the US and India continued to support prices and limit cotton's downside.

Cotton futures retreated toward 80 cents a pound, pulling back from a one-month high of 81.2 cents reached on July 7, as a stronger US dollar weighed on the market. The dollar's strength followed a significant escalation in Middle East tensions, after President Donald Trump declared the ceasefire with Iran over and revoked the 60-day waiver that had allowed Tehran to sell crude oil.

That policy shift sent oil prices higher on renewed concerns over supply disruptions, and the resulting flight toward the dollar as a safe-haven currency made dollar-denominated commodities like cotton more expensive for buyers using other currencies. Since cotton is priced globally in dollars, a stronger greenback effectively raises the cost for international buyers, dampening demand and pressuring futures prices even without any direct change in the underlying cotton supply-and-demand balance.

Interestingly, the same oil price surge that strengthened the dollar has also provided a partial offset to cotton's decline through a different channel. Higher oil prices raise feedstock costs for petrochemicals such as naphtha, which is used to produce synthetic fibres that compete directly with cotton in textile manufacturing. As synthetic fibres become relatively more expensive, cotton becomes comparatively more competitive, helping to limit the scale of its losses even as the dollar-driven pressure weighs on the market.

Weather developments have added a further layer of support. US cotton crops are facing record heat, even though the bulk of planting has already been completed, raising some concern about crop development in the weeks ahead. In India, the world's largest cotton producer, the country experienced its fifth-driest June since 1901, and forecasters expect below-average monsoon rainfall to continue, a combination that is delaying planting and raising questions about the size of this season's Indian crop.

On the export side, Brazil has emerged as a source of increased global supply, with the country's cotton exports rising 10.6% from a year earlier. That growth in Brazilian shipments provides an offsetting force to the weather-related supply concerns in the US and India, illustrating how the global cotton market is currently balancing multiple, partially conflicting signals — a stronger dollar and adverse weather in two major producing regions on one side, and rising Brazilian exports and reduced synthetic fibre competitiveness on the other.