US Cotton Futures Rally Despite Uptick in Production Estimates

Cotton contract holders shrugged off a mildly cautious USDA outlook on Tuesday, with the March, May and July contracts all finishing in the green. The Mar 26 contract settled at 63.86 (up 18 points), while May 26 touched 64.92 (up 16 points) and Jul 26 reached 65.91 (up 11 points).

The slight upside momentum came even after the USDA’s latest Crop Production report increased yield expectations by 10 lbs/acre to 929 lbs, pushing total production up 150,000 bales to 14.27 million bales. Acreage estimates remained unchanged from prior forecasts.

Market Context and Price Pressures

Energy markets provided headwinds, with crude oil sliding 49 cents per barrel to $58.39, while the dollar index climbed 0.114 to 99.175. The cash average price for cotton was reduced by 2 cents to 60 cents/lb, though this moderation didn’t prevent the futures rally.

The WASDE inventory update showed a modest adjustment to projected ending stocks, up 200,000 bales to 4.5 million, as use patterns shifted slightly. Global supplies remained largely stable, with world stocks noted at 75.97 million bales, a 40,000 bale increase from the previous week.

On-the-Ground Demand Signals

Cotton ginning activity tells another part of the story. As of December 1, US cotton ginned totaled 8.645 million RB, representing a 10.25% decline year-over-year—a sign of slower processing pace this season.

The Monday auction through The Seam saw 5,608 bales trade at an average of 60.2 cents/lb, providing a real-time gauge of physical market sentiment. The Cotlook A Index dropped 25 points to 73.95 cents on December 8, while the Adjusted World Price moved to 51.28 cents/lb.

Positioning Shifts Among Traders

Commitment of Traders data for the week ending November 4 revealed specs trimming 10,311 contracts from their net short position, bringing it to 63,782 contracts. This reduction in bearish bets suggests some rebalancing of market positioning.

ICE certified cotton stocks held steady at 13,971 bales on December 8, providing stable collateral availability for contract holders.