Cotton Rallying Monday, with Outside Support

Cotton futures are trading higher, with July 2025 contracts up 138 points to 66.44 and October 2025 contracts up 95 points to 68.39, supported by rising crude oil prices and a weakening US dollar. Despite the price increase, the Cotlook A Index declined 45 points to 77.25 on May 30, and the latest Commitment of Traders data reveals that speculators increased their net short positions by 3,180 contracts to a total of 43,219 as of May 27.

Analysis

Cotton futures demonstrated notable strength at midday, with the July 2025 contract advancing 138 points to 66.44 cents/lb, October 2025 up 95 points to 68.39 cents/lb, and December 2025 gaining 97 points to 68.72 cents/lb. This rally is supported by positive external macroeconomic factors, including a $2.37 increase in crude oil prices and a $0.449 decline in the US dollar index to $98.810. However, conflicting signals emerge from other market indicators. The Cotlook A Index, a measure of physical cotton prices, decreased by 45 points to 77.25 on May 30th. Concurrently, Commitment of Traders data as of May 27th showed that speculative participants increased their net short positions by 3,180 contracts, reaching a total of 43,219 contracts, suggesting growing bearish sentiment among this group. While ICE certified cotton stocks held steady at 43,006 bales on May 30th and the USDA’s Adjusted World Price (AWP) rose by 32 points to 53.84 cents/lb in the preceding week, the divergence between rallying futures and a weaker physical market benchmark, coupled with increased speculative shorting, indicates a complex market dynamic requiring careful monitoring.

Key Decisions for Investors

• Investors should recognize the current upward momentum in cotton futures driven by favorable oil and currency movements, yet remain cautious due to the contrasting decline in the Cotlook A Index and the significant build-up in speculative net short positions.