Cotton Bearish Signals Mount as Supply Concerns Intensify

Cotton prices took a significant hit on Wednesday, with futures contracts sliding sharply across all major months. The December contract closed at 62.3 cents/lb, down 27 points, while March settled at 63.78 cents/lb with a steeper 61-point decline. May futures also weakened, closing at 65.03 cents/lb and losing 54 points.

The weakness stems from a combination of external headwinds. Crude oil dropped $1.15 per barrel to settle at $59.59, weighing on overall commodity sentiment. Meanwhile, the US dollar index climbed 0.606 points to $100.055, making dollar-denominated commodities like cotton less attractive to international buyers.

Export Volumes Hit Decade Low, Signaling Demand Deterioration

August cotton exports (excluding linters) totaled 642,851 bales, marking a 10-year low for the month and representing a sharp 31.39% decline from July. This export data paints a concerning picture for demand, suggesting buyers are pulling back amid uncertain market conditions. The Cotlook A Index reflected this weakness, dropping another 10 points to 74.30 cents on November 14.

Physical Market Remains Subdued

The Tuesday online auction from The Seam recorded modest activity with 6,538 bales sold at an average price of 63.22 cents/lb. ICE certified cotton stocks remained stable at 20,344 bales as of November 17, while the Adjusted World Price was quoted at 51.83 cents/lb, indicating a significant discount between international and domestic pricing levels.

Managed Money Tilts Short Amid Market Pressure

According to Commitment of Traders data dated September 30, managed money funds were adding 2,736 contracts to their net short position, bringing their total short exposure to 64,740 contracts. This accumulation of bearish bets underscores institutional conviction in further downside pressure ahead.