Cotton continues establishing new price highs again and again. That was last week’s first sentence, and it still applies. After posting a minor selloff at mid-week, prices charged higher at week’s end as both the old crop July futures contract and the new crop December contract settled the week near the weekly highs, and near the life of contract high for the December contract. Rumors abound as to the price strength, including growing demand, President Trump’s deal with China for a big purchase, a major mistake by USDA that will be corrected next week, which indicates U.S. and world supply are significantly lower than currently estimated.
Likely, those will prove to be rumors. The drought problems across the U.S. and Brazilian cotton regions are not mentioned in the market as much as in the past. Most, but not all, the Southeast and Mid-South cotton acreage has received both timely rains over the past two weeks. While weather was not the major discussion of the week, a drought-reduced 2026 crop is without question on the horizon. Given that Brazil and the U.S. together account for most of the world’s exportable supplies of cotton, the condition of the cotton crop in each of those two countries commands the bulk of cotton’s price discovery discussion. The new crop will remain the stronger of the two contract months as drought prospects across the Rolling Plains and High Plains are on traders’ minds.
Additionally, the moisture needs across Brazil are noted and are likely to reduce the size of the 2026 world crop, increasing the price pressure on ending stocks. The opportunity for 88 cents is front and center for the December contract. Demand needs remain very light; thus, the July contract will continue to work the 85-cent range, and prospects for strong prices will have to come from supply pressure associated with a reduced 2026 world crop.
The nearby July contract settled the week at 84.73 cents while December settled above the magic 85-cent mark at 85. 46. Supporting the strength of the July contract continues to be a bullish On Call report that indicates on-call sales versus on-call purchases are approaching a ratio of 2 to 1. Thus, mills will be forced into some pricing levels likely higher than they have already turned down. Mills were rewarded with delaying their pricing decisions in recent years, but will have to pay up this season. However, export sales levels are beginning to suffer at the current round of higher prices.
Suggestions for improving demand are nothing more than rhetoric. Cotton continues to lose favor with both the U.S. and world consumer. The U.S. cotton industry is not promoting itself with the American consumer, and U.S. consumption will continue to fall until the industry makes a conscious effort to market itself to the end user.
USDA will release its February supply demand report on Tuesday, May 12. The New York Cotton Roundtable group will discuss the report at 1:30 PM central time, just after the report’s 11:00 AM release. To listen to the discussion, call 605-313-5148 and when prompted enter code 571052. You will have the opportunity to ask questions. An archived recording will be available on Facebook, Twitter, and www.agmarketnetwork.com. BASF, the owner of FiberMax and Stoneville, is the sponsor.
Give a gift of cotton today.
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Source: cottongrower.com