Cotton Futures Extend Slide Amid Weak Export Outlook and Stronger Dollar
New York cotton futures extended their recent weakness into Monday's trading session, pressured by a combination of lackluster export data and a strengthening U.S. dollar. The front-month March contract led the decline, continuing a downtrend that has seen prices erode over the past week.
The market's bearish sentiment was reinforced by Friday's Commitments of Traders report from the Commodity Futures Trading Commission. The data revealed that managed money funds, which include hedge funds and commodity trading advisors, significantly increased their net short positions by 13,077 contracts as of January 27. This aggressive positioning suggests professional traders are betting on further price declines, with the collective net short now standing at 65,029 contracts.
Fundamentally, the outlook remains challenged. U.S. cotton export commitments for the 2024/25 season reached 7.553 million running bales as of January 22, according to USDA data. This figure represents a concerning 13% drop compared to the same period last year and accounts for only 66% of the USDA's full-year export projection. Historically, commitments at this stage average 84% of the annual forecast, indicating current sales are well behind the typical pace and raising questions about final demand.
In related markets, crude oil futures showed modest gains, trading up $0.32 at $64.74 per barrel, while the U.S. Dollar Index strengthened by $0.893 to 97.030. A stronger dollar typically makes dollar-denominated commodities like cotton more expensive for foreign buyers, potentially further dampening export demand.
Other market indicators presented a mixed picture. The Cotlook 'A' Index, a key benchmark for global physical cotton prices, held steady at 74.15 cents per pound on January 27. Meanwhile, the weekly Adjusted World Price (AWP), used for calculating U.S. loan deficiency payments, was revised down to 50.23 cents per pound, a 76-point decrease from the previous week.
Market Reaction & Analyst Commentary
The price action reflected the prevailing caution. At Monday's open, March 2026 cotton futures were indicated down 64 points at 63.17 cents, May futures were down 58 points at 64.93, and July futures were down 53 points at 66.55. This follows Friday's session where contracts closed 30 to 46 points lower.
"The numbers don't lie, and they're painting a pretty clear picture of softening demand," said Marcus Chen, a veteran softs analyst at AgriVantage Partners. "When you see exports lagging this far behind the five-year average, it's a structural headwind that won't be solved by a single bullish report. The market needs to see consistent, week-over-week improvements in sales to China and other major buyers."
Eleanor Vance, a portfolio manager for a commodities-focused fund, offered a more tempered view. "There's undoubtedly short-term pressure, but we're watching weather patterns in Texas very closely. Any threat to the planting season could change this narrative quickly. The current price level might already be factoring in the export slowdown, presenting a potential value opportunity for the longer term."
A more critical perspective came from Raj Patel, an independent trader and frequent market commentator. "This is what happens when the market gets ahead of itself on optimistic harvest forecasts," Patel stated bluntly. "The export data is abysmal. The funds are piling on the short side because the fundamentals are broken. Until we see a major shift in global trade flows or a significant supply shock, every rally is just a selling opportunity."
David Lee, a fourth-generation cotton grower from West Texas, shared a ground-level perspective. "It's frustrating to see these prices after the inputs we've managed. The market feels disconnected. The AWP drop hurts. We're all hoping for a turnaround before planting decisions are finalized, but the confidence isn't there right now."
On the date of publication, the author did not have positions in any securities mentioned. This article is for informational purposes only.