For the week ending Friday, March 21, the nearby May’25 ICE cotton futures contract trended lower (see chart above courtesy of Barchart.com). May’25 ICE cotton settled Friday down 81 points at 65.27 cents per pound. New crop Dec’25 settled at 68.66 cents per pound. Chinese cotton prices were flat this week, while the A-Index of world cotton prices was flat-to-lower.
In other markets, the most active CBOT corn contract followed a down-then-up V-shaped pattern. CBOT soybeans and KC wheat futures both followed more of a weekly down-trend. The U.S. dollar index trended higher, peaked, and then stair-stepped lower. Longer term the normal inverse relationship appears to be holding between the up-trending U.S. dollar index and down-trending ICE cotton futures. Other macro influences (i.e., GDP, inflation, and interest rate policy) remained mixed in their expectation and implication. The U.S. Federal Reserve left interest rates unchanged but forecasted a couple of future rate cuts, even in the face of forecasted rising inflation.
Cotton-focused market influences this week: Probably all of the projected U.S. old crop production is ginned and classed as of mid March (final ginning and classing reports may not be published til May). The last two months of U.S. export sales reports belie a slight uptrend, but this was reversed by weak export sales numbers for the week ending March 13. The pace of 2024/25 export shipments continue above the weekly average level needed to reach USDA’s target level of exports (11.0 million bales).
For the week ending March 20, the day-to-day shifts in ICE cotton open interest were mostly lower, except for Wednesday. This declining trend in open interest coincided with a steady erosion of price settlements, giving the appearance of long liquidation. Indeed, Tuesday’s weekly snapshot of speculative open interest did indeed show 2,321 fewer hedge longs, week over week. But this was outweighed by a 7,822 reduction in hedge fund shorts, compared to the previous week. And then the index trader net long position actually increased by 2,084 contracts, week over week. So in short, the change in the speculative position was decidedly mixed.
The dynamics of ICE cotton futures may also represent a wet blanket on the market. It remains true that unfixed call sales (by mills) are at an historically low level, perhaps reflecting the cautionary buying on the demand side. In terms of ratios, unfixed call purchases (by suppliers) outweigh unfixed call sales by almost two-fold across all contracts, as of March 14. In the nearby May’25 contract the imbalance is similarly in favor of unfixed call purchases. The implications of that imbalance are excess selling pressure on ICE futures when those May-based on call positions are fixed. Strictly speaking, this has less to do with the demand for cotton and more about the demand for futures by commercial hedgers.
For more details and data on Old Crop and New Crop fundamentals, plus other near term influences, follow these links (or the drop-down menus above) to those sub-pages.