The cotton market trudged through the week, looking for even a sliver of the bullish momentum it had enjoyed the prior two-plus months. Yet it finds itself stuck in the high 70s and unable to break above the 80-cent barrier, which has now become a rather stiff price resistance level. The only fundamental of consequence at work in the market is Mother Nature. The dramatic shift in world cotton trade over the past ten years, or is it only five, is that Brazil has supplanted the U.S. as the world’s major supplier, and that has changed the principal workings of world cotton price discovery. Secondly, cotton’s inability to reconnect with the consumer as a fabric of choice has encouraged the demise of the U.S.’s share of world cotton production and trade.
The old crop July contract, only two weeks from entering its expiry period, settled the week at 76.15 cents, or squarely at the 76 price support mentioned last week. If that support fails, the 71-72 cent level could be touched. The continued increase in certificated stocks registered on the New York ICE contract, coupled with the near full carry on the futures board, is an indication that bearishness cannot be ignored. Yet, mill on-call sales continue as an indicator that the 76-cent level should hold. I have been adamant that the required mill fixations would hold the old crop price above 76 cents, but the poor demand for U.S. cotton, relative to other growths, may allow July to slip slightly below the 76-cent level.
The new crop December contract likewise failed to climb above 80 cents on the week, settling at 79.59 cents, and will continue to take its cue from Mother Nature. Yet, any kindness from Mother Nature could drag new crop prices down to the July support level of 76 cents. The recent market bullishness was all about drought conditions across much of Brazil and the U.S, coupled with the somewhat shortage in world carryover stocks. However, weather conditions and the prospect for crop progress are markedly improved compared to a month ago. Current conditions suggest that world supply will exceed world needs and that world ending stocks will increase ever so slightly during the 2026-27 season. Thus, the mid to upper 70’s are beginning to be viewed as an equilibrium price for the coming season.
The market remains nervous about moisture conditions across the Texas Rolling Plains, but other regions have seen significant improvement. Certainly, the High Plains always needs moisture, but it is the potential of the dryland crop across the Rolling Plains that the market views as the basis for significant shifts in U.S. crop size. While conditions are still marginal, crop prospects there improved compared to a month ago, as represented by the 800-900 point drop in prices over the past two plus weeks.
Consider 79-80 cents, basis December, for hedging up to 25 percent of the 2026 crop.
Give a gift of cotton today.
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Source: cottongrower.com