Mid-Week Cotton Rally Signals Shifting Market Sentiment

Cotton wrapped up Wednesday’s trading session with a notable upside move, as contract prices advanced between 20 and 33 points throughout the day. This midweek bounce reflects broader commodity strength, with crude oil pushing higher at $56.90 per barrel (up $1.63) and the US dollar index climbing to $97.995.

Supply Dynamics Supporting Price Action

Market structure remains supportive as inventory pressures ease. ICE certified cotton stocks declined by 78 bales on December 16, now standing at 12,396 bales. The Adjusted World Price moved to 50.39 cents/lb in the latest update, with fresh pricing expected Thursday. Meanwhile, The Seam’s online auction recorded 5,155 bales sold at an average price of 61.24 cents/lb, demonstrating consistent demand at current levels.

Speculative Positioning and Technical Signals

Spec traders showed confidence this week, reducing their net short position in cotton futures and options by 2,212 contracts during the period ending December 2. Their net short now sits at 59,787 contracts—a meaningful shift in market structure. The Cotlook A Index reinforced this bullish undertone, rising 5 points to reach 73.90 cents on December 15.

Contract Closes Across the Curve

March 26 Cotton settled at 63.43, up 33 points and showing the strongest daily performance. May 26 Cotton closed at 64.53 (up 27 points), while July 26 Cotton finished at 65.58, gaining 20 points. This graduated move across the forward curve suggests orderly demand for cotton at multiple time horizons, adding credibility to Wednesday’s rally.