Cotton Fading Off Overnight Weakness for Midday Gains

Cotton futures are trading higher despite overnight weakness, with contracts up 45 to 60 points, while crude oil remains steady and the US dollar index declines. US cotton planting is slightly behind the 5-year average, with Texas and Georgia lagging, and ICE cotton stocks increased by 2,213 bales.

Analysis

Cotton futures have reversed overnight weakness, trading notably higher at Tuesday's midday with contracts for 2025 delivery, such as July 2025 (up 60 points to 66.24 cents/lb), October 2025 (up 48 points to 68.80 cents/lb), and December 2025 (up 55 points to 68.89 cents/lb), all showing gains. This price strength contrasts with several fundamental indicators: U.S. cotton planting progress, at 40% complete nationally as of Sunday, trails the 5-year average of 43%, with key states Texas (35% planted, 3 points behind normal) and Georgia (41% planted, 4 points behind normal) also lagging. Additionally, ICE certified cotton stocks saw an increase of 2,213 bales to a total of 36,366 bales on May 19, a development that could temper price enthusiasm. Physical market benchmarks also reflect recent softness, with the Cotlook A Index declining 50 points to 76.75 and the USDA’s Adjusted World Price (AWP) for cotton decreasing by 91 points to 53.90 cents/lb last Thursday. The simultaneous weakening of the U.S. dollar index, which fell $0.128 to $100.160, may be contributing some buoyancy to these dollar-denominated commodity prices. A recent physical sale on The Seam platform saw 2,465 bales transacted at an average of 63.48 cents/lb on May 19, providing a reference for current cash values.

Key Decisions for Investors

• Investors should closely monitor the sustainability of the current futures rally, given its divergence from weaker physical market indicators like the Cotlook A Index and AWP, and the slightly delayed U.S. planting pace.
• The declining U.S. dollar index may offer transient support to cotton prices; however, its future direction, alongside weekly planting progress reports and weather developments in key U.S. growing regions, will be critical near-term drivers to observe.
• Traders should scrutinize further changes in ICE certified stock levels, as continued increases could cap upside price potential if not matched by commensurate demand signals.