Cotton futures have been fighting to avoid new lows this week. May cotton kicked off the week on a lower note, with prices struggling to hold above 64 cents a pound. World stocks are seen as adequate, while U.S. supplies remain at a surplus.
Speculators are extremely short in the market. The latest CFTC export data showed that money managers were net sellers of 8,194 cotton contracts during the week ending Feb. 10. That brought their total position to a net short of 71,777 contracts.
There appears to be room for funds to add more shorts, which was likely the case early this week, as the current downtrend remains intact. Technically, a convincing move above 64 cents could offer some support for the market.
The USDA expects U.S. cotton acres to rise 1.1 percent in 2026 to 9.4 million, holding at the second-lowest since 2015, according to a preliminary forecast on Thursday.
“Planted acreage decisions this spring likely will be influenced by additional factors including the cotton farmers’ experiences during the previous season, insurance reference prices, fixed cost investments, and the soil moisture conditions heading into planting season,” the USDA noted.
A potential challenge for plantings will be ongoing dry conditions across the Cotton Belt as of mid-February. The latest Drought Monitor showed that 81 percent of U.S. cotton areas are experiencing drought, compared to just 30 percent a year ago.
Total ending stocks could tighten slightly in the U.S. due to higher exports and slightly lower production. But that would still be the second-highest carryout in the past four years.
World ending stocks are projected to fall by nearly 4 million bales in 2026/27 due to global consumption outpacing production. World cotton production hit a 10-year high in 2025/26, contributing to low cotton prices, as consumption was marginally lower than the previous year.
Cotton could benefit from lower production and higher trade next season. Output is expected to decline in China, Brazil, and the United States. Strong competition from Brazil could still challenge U.S. exports despite lower production. Additionally, cotton fiber is not expected to capture growth in textile demand, largely due to synthetic fibers.
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