FX.co ★ Cotton Trades Near Three-Month High

Cotton futures hovered around 84 cents per pound, just below the three-month high of 84.5 cents, as adverse weather in major producing regions stoked supply concerns. The USDA’s latest crop progress report showed only 42% of the US cotton crop rated in good to excellent condition, down from 46% the previous week and 55% a year earlier. The crop is entering a critical phase of the growing season, while triple-digit temperatures and limited rainfall are putting both dryland and irrigated fields at risk.

In India, forecasts point to below-average monsoon rainfall persisting through August, heightening worries over potential yield losses. At the same time, Brazil’s cotton output is expected to decline as El Niño-related dryness intensifies into September. Further tightening the supply outlook, China has prohibited domestic entities from conducting business with six US cotton-linked companies after Washington added 43 Chinese firms to its forced-labor import restriction list.

Even so, the recent price rally has left cotton futures vulnerable to profit-taking, as traders look to lock in recent gains.