Cotton continues to establish new price highs again and again. The 85-cent objective has been hit, for all practical purposes. The old crop spot month July settled the week at 84.19 after reaching a weekly high of 84.27. Not to be outdone, the new crop December futures contract climbed the ladder to 84.61 and settled at 84.56.
Both contracts settled the week near the weekly highs; thus, portending yet more bullish expectations for even higher prices. I am reminded of the legendary Icarus from Greek mythology, who soared so high that the sun melted his wax wings, and he fell back to earth. While not predicting any price collapse, moisture from that same sky can still boost 2026 production around the world, especially in Brazil and the United States; thus, taking an easy nickel, or 500 points, out of the market. Too, the price climb has been very steep, too steep to maintain for very long. While we can project another 300 points upward, up to 88 cents, plus or minus, one must understand this market is grounded only in the supply side of the price equation, as drought concerns facing the Brazilian crop and some 60 percent of the U.S. production area are the only impetus for higher prices.
Any suggestion that higher oil prices have caused mills to switch from synthetics to cotton is shallow at this point. Mill production has not increased, and as such, mills will not switch to cotton until and unless the consumer once again asks for cotton. Additionally, mills are expecting the slowly rising polyester prices to come down and are not forward booking synthetic fiber. Yet, when cotton was king and was the consumer’s fabric of choice, any rise in synthetic prices would have been a boon for cotton consumption and thus cotton prices. Not so now. Again, the current price rally is strictly supply-based and totally void of demand factors.
Additionally, market participants recognize that it is too late in the production cycle to make any significant changes in the production activity for cotton across the northern hemisphere. The production season has already begun, and the reduced acreage in the U.S. and across the northern hemisphere is effectively locked in. Additional acreage will not be brought into cotton production. Had the price rally occurred two months ago, some additional land area would have been brought into cotton production. Yes, certainly there will be a few acres that will come into production because of the rally in prices, but the major problems of locating additional seed and other input supplies, including financing, coupled with locating cotton-specific production equipment, and ensuring access to ginning, all present problems. The combination of all the issues will keep cotton acreage below 10.2 million acres, even if moisture does bless the vast Rolling Plains of Texas.
Yet, Mother Nature remains in control of prices, and regardless of whether the rally continues or fails, prices will continue to back and fill from the low to mid 80s, plus or minus 500 points. While this week’s strong rally was very impressive, the market did send signals that a further price advance will be difficult. The absolute price spread between old crop and new crop all but disappeared, highlighting the fact that the rally is nothing more than a weather market rally. While this may be the year that the market truly kills the crop, the below-average world carryover will keep prices strong. Additionally, with nearly two-thirds of the world’s cotton trade accounted for by the U.S and Brazil, the health of those two crops will continue to dominate market activity.
Mills have been especially active during the past two weeks, fixing cotton purchased on call. The weekly report indicated very aggressive price fixation activity as prices moved higher. The imbalance between sales and purchases narrowed, but the report does continue to indicate that the need to do additional fixations will hold prices at least through May.
Exports were reported to be stronger than expected, given higher prices. That opens the door to the possibility of demand expansion. However, mills continue to complain about a lack of business and have expanded holiday schedules. Chinese mills have complained about the ready availability of cotton, and the tightness in Chinese supplies has also had a part in prices moving to higher ground.
Mother Nature controls the market. However, the Texas Plains still have a month to six weeks to receive the million-dollar rain. Consider forward pricing 25 percent to 33 percent of 2026 expected production.
Give a gift of cotton today!
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Source: cottongrower.com