Cotton's Wednesday Rally: Energy Markets Dragging or Opportunity?

2025-12-26 04:02:40

Abstract generation in progress

Cotton futures are finally catching a bid on Wednesday, bouncing back 39-48 points after Tuesday’s brutal selloff that saw the market crater 72-84 points. Here’s what’s really going on under the hood.

The Energy Problem

The synthetic market isn’t playing nice. Crude oil futures took another beating, dropping $1.65/barrel down to $55.17, and that’s putting serious pressure on agricultural commodities across the board. When energy weakens, everything tends to follow. The US dollar index climbed $0.038 to $97.995, adding another headwind to export demand.

Where Are Prices Actually Trading?

Let’s cut through the noise and focus on the front-month contracts:

Mar 26 Cotton: Closed at 63.1 cents/lb (down 84 points yesterday, now up 48 points)
May 26 Cotton: Closed at 64.26 cents/lb (down 80 points yesterday, now up 45 points)
Jul 26 Cotton: Closed at 65.38 cents/lb (down 72 points yesterday, now up 39 points)

The Supply Side Is Tightening

Physical market data shows some stabilization. The Seam’s Monday online auction moved 15,641 bales at 59.57 cents/lb—solid volume without panic pricing. Meanwhile, ICE certified cotton stocks dropped 1,497 bales to sit at 12,474 bales, a modest reduction but worth watching.

The Cotlook A Index lost 10 points on December 15, settling at 73.85 cents. Meanwhile, the Adjusted World Price was marked down to 50.39 cents/lb last Thursday, a 89-point decline from the week before. The gap between world prices and US futures is notable—and potentially meaningful for traders positioning ahead of export demand.

Bottom Line

Cotton’s Wednesday bounce is real but fragile. The rally faces heavy lifting from weak energy prices and a stronger dollar. Watch that Adjusted World Price and ICE stock levels—if they stabilize, we could see the bid stick around.

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