Cotton Prices Surge, Reaching Higher Levels by Friday's Market Close
In the cotton market, December futures concluded Friday with gains of 20 to 22 points, despite a minor dip in front-month December contracts. Meanwhile, July futures faced losses of around 127 points this week. Crude oil prices saw a decline of $0.21 on Friday, while the US dollar index rose by $0.161 to reach $99.370.
Export Sales data published on May 22 revealed a three-week low of 118,658 Round Bales (RB) of cotton sold. Vietnam was the largest buyer with 65,600 RB, followed by Bangladesh with 17,300 RB. Shipments for the week also surged to 275,379 RB, with Vietnam and Pakistan as the top destinations.
Online sales from The Seam on Thursday resulted in 450 bales sold at an average price of 66.34 cents per pound. The Cotlook A Index experienced a decrease of 25 points on May 29, settling at 77.70. Certified stocks on the International Cotton Exchange (ICE) increased by 1,143 bales on May 29, resulting in a certified stocks level of 43,006 bales. The USDA's Adjusted World Price (AWP) rose 32 points this week to 53.84 cents per pound.
On the day, Jul 25 Cotton closed at 65.06 (up 22 points), Oct 25 Cotton closed at 67.44 (up 20 points), and Dec 25 Cotton closed at 67.75 (down 1 point).
As of May 27, Commitment of Traders data showed speculators increasing their net short position by 3,180 contracts to 43,219 contracts.
Recent reports suggest a forecasted 3% drop in global cotton production for the 2025/26 season, attributed primarily to declines in major producing countries like China, India, and Australia. Simultaneously, global mill use is projected to increase by 1% to 118.1 million bales in 2025/26. Additionally, global cotton trade is on track to reach a five-year high, with ending stocks projected to remain stable.
Given the relatively balanced production-consumption dynamics, significant price swings might be limited in the cotton futures market unless additional market factors intervene. Overall, the outlook for cotton prices remains influenced by economic fundamentals and market uncertainties, with factors like weather conditions, policy updates, and global demand likely to influence price trends moving forward.
- Amidst the projected 3% drop in global cotton production for the 2025/26 season, the finance sector might closely monitor the cotton industry's ability to maintain prices, given the simultaneous increase in global mill use and projected rise in global cotton trade.
- In light of the expected five-year high in global cotton trade and relatively stable ending stocks, investors in the finance industry may find it prudent to consider the impact of weather conditions, policy updates, and global demand on the cotton market's price trends, as these factors could potentially cause significant price swings in the futures market.
