Cotton futures began the week on a negative note after slipping to new contract lows on Monday. March cotton traded as low as 62.55 cents a pound before recovering some of those losses to close near 63 cents, the lowest close since August 2020. Prices did rebound overnight, making yesterday’s lows seem like the low end of their current trading range.

The market still has plenty of work before it reverses its strong bearish trend. Prices have consistently posted lower highs and lower lows for much of the past year.

Money managers have been reducing their net short position since October. As of the week ending Jan. 20, funds held a net short position of 49,000 cotton contracts, compared to a record net short of 87,000 contracts. Heavy commercial selling has capped rallies this fall and winter despite funds offsetting short positions.

U.S. cotton export sales surged to 438,400 bales during the week ending Jan. 15. The buying was led by Vietnam, though Bangladesh and Pakistan were also strong buyers.

Accumulated exports are now running slightly ahead of year-ago levels. However, total commitments remain about 13 percent lower than last year. Additionally, commitments are running at the slowest pace since the 2015/16 season.

The Buying American Cotton Act of 2026 was introduced in the House last week. The bill aims to increase demand for U.S. cotton by offering tax credits to retailers selling clothes from cotton sourced domestically.

We previously dove into how cotton has a demand problem, as the majority of what is produced in the U.S. is exported. If passed, the bill could have some downstream impacts that could drive more demand for U.S. cotton.

Globally, Brazilian farmers have been planting cotton at a more rapid rate over the past few weeks. Planting in Mato Grosso reached 47.8 percent complete last week, compared to 28.6 percent the same week last year.
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PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. FUTURES TRADING INVOLVES SUBSTANTIAL RISK AND IS NOT SUITABLE FOR ALL INVESTORS.