For the week ending Friday, February 14, the nearby Mar’25 ICE cotton futures contract trended higher, peaked, then trended lower, then bottomed, and finished the week in a sideways gyration (see chart above courtesy of Barchart.com). On Friday the nearby Mar’25 settled down 28 points at 67.11 cents per pound. New crop Dec’25 settled Friday up quarter of a cent at 69.39 cents per pound. Chinese cotton prices were flat-to-higher across the week, as was the pattern of the A-Index of world cotton prices.
In other markets, the most active CBOT corn futures gyrated sideways while CBOT soybeans and KC wheat futures showed more of a down-trending pattern across the week. U.S. dollar index this week was flat before gliding down for a landing, which supports the longer term appearance of a top to the post-Election Day rally that peaked January 13. Dollar weakness was attributed to fears of slow economic growth from a possible trade war over proposed U.S. tariffs over foreign metal imports. Other macro influences (i.e., GDP, inflation, and interest rate policy) were typically mixed in their implication. The flurry of executive orders, actions, and rumors of actions from the new administration may be having an economic wet blanket effect.
Continued high volume fund rolling was a market influence this week with the rollover of the Goldman and Bloomberg based commodity funds. Beyond that, there were some cotton-focused influences. USDA published neutral-to-bearish supply and demand numbers in their February WASDE report. About 99% of the projected U.S. crop has been ginned and classed as of early February. The last six weeks of weekly U.S. export sales reports belie a slight uptrend, which is encouraging. In Alabama they might describe it as “tolerable well”. The pace of 2024/25 export shipments has been increasing towards the weekly average level needed to reach USDA’s target level of exports (11.0 million bales).
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. In the nearby Mar’25 contract the imbalance is over four-fold in favor of unfixed call purchases. The implications of that imbalance are excess selling pressure on ICE futures when those March-based on call positions are fixed. Strictly speaking, this has less to do with the demand for cotton as much as it involves the demand for futures by commercial hedgers.
For the week ending February 13, the day-to-day levels in open interest in ICE cotton gradually increased across the week, along with a slight uptrend in nearby price settlements during the first part of the week. This has the appearance of new long positioning during the first half of the week. Indeed, as of Tuesday, February 11 (released Friday, February 14) the weekly snapshot of speculative positioning showed hedge fund longs increasing by 3,131 contracts, while the index fund net long position expanded by 2,175 contracts, week over week. This long positioning was further reinforced by 1,101 fewer (covered) hedge fund shorts compared to last week.
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.