US Cotton Rebounds Midday as Trump-Modi Trade Deal Signals Export Boost

Morning weakness in US cotton futures gave way to afternoon recovery as markets reacted to a significant trade announcement. The late January trading session saw cotton futures experiencing pressure in early hours, with prices down 14 to 18 points at midday before stabilizing. This market movement came in the context of broader commodity volatility, with crude oil down $3.39 per barrel to $61.82 and the US dollar index rising to $97.500.

Political Developments Ignite Market Momentum

A crucial factor shifted sentiment when President Trump announced a successful call with India’s President Modi. The announcement, made via Truth Social, outlined a substantial trade agreement that could reshape bilateral commerce. The deal includes a significant tariff reduction on Indian goods, lowering US duties from 25% to 18%, while India committed to purchasing over $500 billion in US exports across energy, technology, agricultural products, and coal sectors.

Why This Matters for US Cotton

The India trade deal carries particular significance for the cotton market. Historically, India has ranked among the top 8 purchasers of American cotton exports, making this expanded trade relationship especially relevant to US growers and exporters. The agreement’s emphasis on agricultural products directly supports cotton market dynamics, potentially opening new sales channels for US Cotton producers.

Current Market Data and Trading Activity

Market participants digested the day’s information through multiple data points. Friday’s Commitment of Traders report revealed managed money adding 13,077 contracts to net short positions as of late January, bringing the total to 65,029 contracts. The online auction at The Seam recorded sales of 56.571 cents per pound across 4,462 bales during the trading session.

Price indices reflected ongoing pressure on cotton valuations. The Cotlook A Index declined 20 points to 73.95 cents as of late January, while ICE certified cotton stocks increased by 25,666 to reach 34,226 bales. The Adjusted World Price stood at 50.23 cents per pound, representing a 76-point drop from the prior week.

Forward Contract Pricing

Contract valuations for US cotton futures showed the following positions: March contracts traded at 63.02 cents, down 15 points; May contracts at 64.76 cents, down 17 points; and July contracts at 66.41 cents, down 14 points. These declines reflect the broader pressure facing cotton markets, though the India trade announcement may provide support for longer-dated positions as traders assess potential demand expansion.

Market Implications Ahead

The combination of political developments and market technicals creates an uncertain but potentially constructive environment for US cotton. The tariff reduction with India and commitment to substantial agricultural purchases could offset some of the downward pressure currently affecting prices. Market participants will continue monitoring how this trade agreement translates into actual purchasing activity for American cotton exports in coming months.