ICE cotton futures extended losses on Friday as the U.S. dollar firmed, and the United States Department of Agriculture projected higher production and ending stocks of the natural fiber for the 2024/25 crop year.

* Cotton contracts for March (CTc1) fell 0.64 cents, or 0.93%, at 67.86 cents per lb at 12:46 p.m. ET (1746 GMT).

* "Speculative selling came back in the morning on the back of a rising U.S. dollar index... treasury yields are up, and Wall Street's main indices continued sliding," said Valentin Olah, risk management consultant at StoneX Group.

* "This report was certainly not bullish, reflecting larger crop yields in producing countries, while today's weekly export reports suggested a lag in reporting compared to reduced US exports," Olah added.

* In its January World Agriculture Supply and Demand Estimates (WASDE) report, the USDA raised its U.S. production estimates by 159,000 bales to almost 14.4 million and hiked ending stocks estimates by 400,000 bales to 4.8 million.

* The agency also increased its global production outlook by 2 million bales to 119.45 million, with a large increase in China's crop. The global ending stocks outlook was raised by 1.9 million bales to 77.91 million bales.

* U.S. exports estimates were reduced by 300,000 bales to 11.0 million, while global exports outlook was raised by 225,000 bales, as increases for Brazil, Australia, and India surpass the reduction for the U.S, the report showed.

* Meanwhile, the USDA weekly export sales report showed upland cotton at 191,700 RB, a marketing-year high, up 66% from the previous week and 47% from the prior four-week average.

* The dollar rallied, while U.S. stocks fell sharply on Friday after data showed the U.S. economy created far more jobs in December than expected, reinforcing the belief among investors that U.S. interest rates may not fall much this year.

* A stronger U.S. dollar makes cotton more expensive for overseas buyers.