Cotton Futures Settle Mixed on Friday

Cotton futures are trading lower early Monday, with nearby July contracts extending declines from Friday to their lowest close since April 7, while new crop months, despite early Monday losses, had shown resilience Friday on U.S. weather concerns. Weekly export sales data revealed strong demand for future marketing years, with 2024/25 sales up 38.25% and 2025/26 sales reaching a marketing year high of 274,891 RB, even as current week shipments declined 13.36%. The Cotlook A Index also fell 75 points to 77.75, reflecting broader market pressure.

Analysis

The cotton market is presenting a bifurcated picture, with significant weakness in the nearby contracts contrasting with signs of robust long-term demand. The front-month July contract posted its lowest close since April 7, and the entire futures curve is experiencing losses early Monday, indicating broad-based selling pressure. This near-term bearishness is substantiated by a 13.36% week-over-week decline in upland cotton shipments and a 75-point drop in the Cotlook A Index to 77.75. However, this contrasts sharply with forward-looking demand signals. Weekly export sales for the 2024/25 marketing year jumped 38.25%, and sales for 2025/26 reached a marketing year high, suggesting that buyers are actively securing future supply. While new crop months had previously shown resilience attributed to challenging U.S. weather conditions, they have since succumbed to the negative sentiment, creating a complex environment where immediate physical market weakness is at odds with strong forward bookings and potential weather-related supply risks.

Key Decisions for Investors

• Consider calendar spread trades, such as long new-crop (e.g., Dec '25) versus short nearby futures, to capitalize on the divergence between weak spot market indicators and strong forward export sales.
• Investors with a bullish long-term outlook should monitor weekly export sales data closely; a continuation of record forward bookings could signal a buying opportunity in new crop contracts, especially if U.S. weather concerns escalate.
• Given the sharp drop in the July contract and weak shipment data, short-term traders should exercise caution on long positions and may consider hedging physical inventory against further downside price risk until spot market indicators stabilize.