Cotton trading closed the week just as it began, fighting to keep its head above water. Going into the long weekend, prices slipped back into the low 62s in the soon-expiring old crop March contract but traded as low as 61.70. The new crop December was able to hold the mid-68 cent level, but traded as low as 67.96.
With world stocks being adequate and U.S. stocks being in surplus, prices will struggle if the soon-to-be May spot month futures is to hold above 63 cents. The current spot month March contract goes into its expiry period on February 23; thus, there are just a few more trading days until delivery notices will be issued and the May contract becomes the spot month.
As noted in the prior newsletter, it is expected that the May futures contract will spend its early trading in the 64s but will soon slip into the 63s before falling into the 61-62 cent trading range. Yet speculative traders are extremely short the March contract, and if heavy deliveries against March futures positions materialize, as is now expected, the May contract will have to defend the 59-cent level during the month of March.
Likewise, the probability that July futures will slip into the 59-62 cent trading range during late April when July futures become the spot month. The new crop December contract’s price direction will be determined by the size of northern hemisphere plantings, expected to be near unchanged from 2025, and planting/crop progress yet to be determined by Mother Nature. The market’s concern is that expected plantings coupled with normal weather (whatever that is) will produce a crop that will add to both U.S. and world carryover, a long-term negative for prices.
Textile mills continue to fix the price of prior purchases at a faster rate than growers have fixed the price of cotton they have sold. This has left an imbalance in the need for grower selling of futures contracts versus the need for mill buying of futures to fix the price of prior purchases. The market sees this imbalance and tempts mills to delay price fixing (delay the buying of futures). The natural result is for futures prices to ease lower, ever so slowly. This has played out for some eighteen months and is now one of the primary reasons, except for the lack of demand, which is causing prices to drift lower. This phenomenon is expected to play out in the market at least through the expiration of the July futures contract. Again, it is the natural supply versus demand structure, the mills need to buy futures contracts, and the growers need to sell futures contracts. There are more futures contracts that need to be sold versus the number that need to be bought; thus, lower prices.
The only solution to this bearish phenomenon is an increase in the actual demand for cotton, and mills’ order books do not see such occurring. In fact, a larger number of mills continue to operate at only 70-80 percent of capacity.
USDAs February supply demand report, issued last Tuesday, was much as expected. U.S. exports were lowered 200,000 bales to 12.0 million, and this resulted in an estimated increase in U.S. carryover of 200,000 bales, now at 4.6 million bales, a very price-negative level. The estimate for world consumption was decreased, and estimated world production was increased; thus, world stocks were increased, adding to the market’s bearishness and the fundamental supply factor causing lower prices.
U.S. cotton growers and input suppliers have worked diligently to manage their production for increased yield, just as seed input suppliers have continued to improve the seed genetics growers have requested, and as the market demanded. However, demand has not kept up with the increased yields. The demand for cotton has declined as the U.S. cotton industry has lost its feel for the U.S. consumer. Higher prices await the industry’s decision to attune itself to the consumer.
Improved profits for growers in the meantime can only come from some growers switching their cotton plantings to other crops. The Texas Rolling Plains and High Plains have a comparative advantage over other U.S. growers and the National Cotton Council’s annual survey of growers, released last week, showed that growers in those areas will likely very slightly increase 2026 plantings. Growers across other U.S. regions will reduce acreage. Nevertheless, total 2026 U.S. plantings will mirror 2025 plantings. The market’s concern is that U.S. carryover stocks in 2026-27 will increase and keep cotton prices in a range between 58 and 68 cents.
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Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: cottongrower.com