FX.co ★ Cotton Extends Gains on Weather Concerns

Cotton futures climbed above 86.3 cents per pound, nearing their highest level in more than three months as crop conditions continued to deteriorate. The latest USDA crop progress report showed the share of the crop rated good-to-excellent falling to 38%, down from 40% a week earlier and 46% two weeks ago.

Adverse weather across major producing regions—characterized by drought and rising temperatures—is heightening the risk of lower yields and tighter global supplies, providing support to prices. In Brazil, exports jumped 19% in July, underscoring robust external demand.

At the same time, El Niño conditions are expected to intensify through September, likely keeping temperatures elevated and further threatening yields. In India, cotton plantings have largely recovered after normal July rainfall offset a dry June, although precipitation in August and September will be critical in determining final output.

Even so, the recent rally has left cotton prices vulnerable to bouts of profit-taking, as traders move to lock in gains.