The cotton market climbed to our 88-cent price objective, established new highs, and, as was cautioned two weeks ago, Icarus’ wings began to melt. In just two trading sessions, prices tumbled back down to the 80-cent level. The combination of favorable moisture across the U.S., the competition of planting in China, agreeable weather in Brazil, and a speculator who had become too long, all worked to bring the market price back down.
The USDA May world supply-demand report was issued midweek and matched the fundamental estimates that traders expected. Thus, the adage, buy the rumor, sell the fact, took control of traders’ attitudes, and both the old crop July futures contract and the new crop December contract came tumbling down. Nevertheless, USDA’s verification of the shortage of old crop world carryover, coupled with a smaller world crop this season, did leave the cotton market with a high probability of maintaining prices in the very high 70s to mid-80s at least until July. By early to mid-summer, as Mother Nature adjusts the size of the world crop, particularly in the U.S. and Brazil, prices could break above or below that range at that time. Nevertheless, long-term prices should remain above 75 cents.
Expect the July contract to hold the high 70s with an occasional trip into the low 80s as textile mills must continue to fix the price of short futures contracts for cotton they previously purchased. The weekly On-Call report continues to indicate that mill needs for long futures contracts far outweigh the growers’ fixation needs to sell futures contracts.
Despite claims that the higher oil prices will be a benefit for cotton consumption due to higher polyester prices mills will not reconfigure their fiber mix and switch back to cotton for at least three reasons, (1) the cotton price rally has offset any price benefit that initially may have favored cotton, (2) the long term fiber price comparison decidedly favors polyester and mills will not make short term changes to their fiber mix, (3) cotton’s failure to connect directly with the consumer has forced the consumer, and is now even reenforcing the consumer’s favorability rating of polyester over cotton. The cotton industry has abandoned the consumer…and the price is a reduced size of the U.S. cotton industry.
USDA’s May supply demand report estimated an annual decline in world cotton production of 7 million bales, from 123 million bales to 116 million in 2026 compared to 2025. The estimated decline for the United States was only 600,000 bales, from 13.9 to 13.3 million. The production decline in the primary competitor of the U.S., Brazil, was much starker, a two-million-bale decline, from 19.5 million bales produced in 2026 to an estimated production of 17.5 million bales in 2026.
More importantly, and as a reminder of the U.S. unwillingness to promote cotton, Brazil was estimated to increase its cotton exports by 300,000 bales, from 14.7 million to 15 million bales, despite such a large production decline. However, U.S. exports were forecast to also increase by the same 300,000 bales, from 12 million to 12.3 million bales.
World consumption was estimated to increase 1.6 million bales, from 120.1 to 121.7 million. USDA chose to estimate consumption increases ranging from 50,000 to 200,00 bales across the subcontinent and Asian countries. This is well below the long-term average increase in consumption and is only about a 1.25 percent increase year over year. Thus, consumption remains the primary problem facing the U.S. cotton industry.
Yet, the current 80-cent level, and even down to 75 cents, will encourage U.S. cotton growers to maintain plantings at the 10 million-acre level. Too, current prices, coupled with very recent rains, will likely help boost U.S. plantings. Growers are encouraged to price at least a third of their expected crop with December futures above 80 cents.
Give a gift of cotton today!
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Source: cottongrower.com