Cotton Turning Higher at Friday’s Midday

Cotton futures posted gains of 49 to 60 points in key front months (Dec 25 and Mar 26) on Friday, recovering from overnight weakness, as the US dollar weakened and crude oil prices rose. The Seam online auction registered 3,071 sales at an average of 62.46 cents/lb, though the Cotlook A Index declined slightly by 20 points to 76.95 cents.

Analysis

Cotton futures are showing gains of 49 to 60 point gains across the front months on Friday, shrugging off overnight weakness. The US dollar index is back down up $0.130 on the day to $97.410, with crude oil taking back some recent weakness, up $0.69/barrel. The October 2 online auction from The Seam showed 3,071 sales at an average price of 62.46 cents/lb. The Cotlook A Index was back down 20 points on Thursday to 76.95 cents. ICE cotton stocks were unchanged on 10/2, with the certified stocks level at 17,891 bales. Oct 25 Cotton is at 62.65, down 50 points, Dec 25 Cotton is at 65.69, up 60 points, Mar 26 Cotton is at 67.53, up 49 points On the date of publication, Austin Schroeder did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. More news from Barchart - Barchart Experts Weigh In: Everything You Need to Know About the U.S.-China Soybean Panic - Have Soybeans Hit a Market Bottom? - Why Is China Not Buying U.S. Soybeans? - Grains Are Wobbling, So Mark Your Calendars for September 30 The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Cotton futures are exhibiting strength in the front months, with the December 2025 and March 2026 contracts gaining 60 and 49 points, respectively. This rally appears to be supported by favorable macroeconomic tailwinds, including a weakening U.S. dollar, which declined to $97.410, and a simultaneous $0.69/barrel increase in crude oil prices. However, the physical market is providing conflicting signals. The Cotlook A Index, a key physical benchmark, softened by 20 points to 76.95 cents/lb. Furthermore, an online auction on The Seam platform cleared 3,071 bales at a more modest average price of 62.46 cents/lb. The stability in the market is underscored by unchanged ICE certified cotton stocks, which remain at 17,891 bales, indicating no immediate shift in deliverable supply. A notable divergence exists within the futures curve itself, as the October 2025 contract fell 50 points, contrasting sharply with the gains in later-dated contracts.

Key Decisions for Investors

• Investors should closely monitor the divergence between futures prices, which are reacting to macro factors like the weaker dollar, and the softer physical market indicators such as the Cotlook A index and auction prices.
• The pronounced contango, with December and March contracts rallying while the October contract falls, may present opportunities for calendar spread trades or indicate that current bullishness is concentrated on the longer-term outlook.
• Given the mixed signals, it may be prudent to exercise caution on aggressive long positions until physical market prices show signs of strengthening to confirm the futures rally.