By Beck Barnes

With apologies to Clint Eastwood, the cotton activity continues its roller coaster attitude of good, bad, and ugly. While cotton prices have remained flat with a very slight bearish tone, market news has seen a roller coaster ride.

The Good: The past two weeks have seen excellent fundamentals as U.S. export sales have enjoyed consecutive weeks of crop year and marketing year high sales. In fact, U.S. cotton export sales totaled some three-quarters of a million bales during those two weeks.

The Bad: Ignoring the explosive jump in export sales, cotton prices have given up some 50 points over the same period. One might have expected a near limit up or even a limit up market move based on the sales, or at least a triple-digit jump in prices. But no, prices moved lower. Granted, not a lot lower, but about a half cent lower. Yet, given the price activity over the past two months, a half-cent move could be considered a major move given the extremely narrow trading range we’ve experienced. I point out again that it did take two weeks of trading for the market to drop half a cent.

The Ugly: The U.S. cotton industry continues its two-decade path to distance itself from the consumer of cotton, forgetting that it is the U.S. consumer that drives the demand for cotton and that it is the consumer’s tastes and preferences that drive individual consumer demand. This was the kingpin of cotton promotion from the founding of Cotton Incorporated up until the beginning of the new century. Since then, the promotion of cotton directed to the consumer has been all but totally void. Cotton must find its way back to the demand side of the price equation before it becomes nothing more than a niche crop. The very, very ugly is that the U.S. cotton industry abdicated the throne as the major textile fiber in the U.S.

Cotton trading continues to be locked in a narrow three-cent range, 63-66 cents for old crop and 67-70 cents for the new crop December. The only fundamental that has generated a price response for nearly a year has come from supply-based indicators. Too, the market appears to continue locked into that mode as the 2026 crop year begins. Predictors of 2026 supply, government and private plantings intentions, and weather are the only fundamentals that will move prices in the coming months. Historically, Chinese-based actions have accounted for some 75% of the price variation in the New York contract. In the absence of China providing some fundamental news, U.S. fundamental news has provided the basis for most of the remainder of price variation. The new world cotton market structure now has factors affecting Brazil’s cotton production and export sales supplanting the importance of U.S. fundamentals. However, cotton apparel demand by the U.S. consumer has been a key fundamental actor in all the price activity. However, given the lack of demand, supply is left as the dominant fundamental in price activity for cotton.

 While world carryover, 75 million bales, is moderate given the equilibrium between world supply and demand, U.S. carryover at 4.2 million bales is somewhat high as demand for U.S. cotton is only 13.5-14.0 million bales. Thus, 2026 cotton trading will look to 2026 crop conditions as the primary determinant of price discovery in the coming months, both for the old crop March, May, and July futures contracts and the new crop December contract. The old crop March, May, and July contracts are expected to trade in the 61 to 67 cent range as the old crop becomes history. In the absence of severe weather/planting difficulties, the old crop contracts will spend most of the time trading 63-66 cents. Historical price cycles will likely tease the market, attempting to generate higher prices, but the lack of demand will keep prices in the mid- to low-60s. Likewise, the new crop December contract will continue to mark time, simply waiting for Mother Nature to declare just how friendly she will be to 2026 crop prospects.

Prices could be pushed higher should China look to the export market for U.S. cotton, as it has historically. However, given the downtrend in both Chinese textile activity, coupled with the improved Chinese cotton yields, and the very important link between the Brazilian and Chinese cotton sectors, my deep concern is that China has little reason to buy U.S. cotton except for fill-in needs. Yet, should China purchase some 500,000 more bales from the U.S., then the New York ICE contracts could move up to 500 points higher. Yet, I do not expect any large purchases. We do note that China does continue to purchase some U.S. low grades in limited volume and some high grades as well. However, these type purchases are already built into the price forecast.

The previously mentioned weekly exports reports indicated that the U.S. sold 339,700 bales of Upland two weeks ago and another 412,500 bales last week, both impressive levels. Sales to China over the two-week period were some 70,000 bales, again, an expected amount.

The CFTC weekly On Call report has not relieved any price pressure on the March contract. Mills do continue to limit price fixing, and likewise, growers continue to add a limited amount of on-call purchases (hedging). The market’s On Call position does not offer any price relief for growers. It is noted that certificated stocks remain historically high while open interest is at a record (near record) high. The market has experienced similar conditions over the past year, and such perceived imbalances have not led to any market squeeze activity. Too, there is little reason to expect any this year, especially given the strong level of carry in the market. Merchants do not want to do anything to upend the current level of carry.

The market remains flat, and the puny bulls will continue to be teased. We continue to suggest that rather than using the POP option that growers look to the LDP. Yes, the LDP is small, but it does allow the grower to stay in the game of potential price increases.

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