Cotton Market Rally Bouncing Back as Dollar Weakens Midweek

Cotton futures staged a notable midweek recovery, gaining 39 to 48 points on Wednesday trading after facing considerable headwinds the previous session. The decline on Tuesday was steep, with front-month contracts tumbling 72 to 84 points by the close, reflecting weakness across the broader commodity complex.

Market Drivers Behind the Reversal

The Tuesday selloff was primarily driven by weakness in related markets. Crude oil futures declined sharply by $1.65 per barrel, settling at $55.17, creating headwinds for energy-linked commodities. Meanwhile, the US dollar index climbed 0.038 points higher to reach $97.995, typically pressuring dollar-denominated commodities like cotton.

Wednesday’s upside bounce appears to be correcting some of that excessive selling, with the currency strength moderating slightly.

Supply Data Signals Continued Tightness

Recent supply data reinforces a mixed picture. ICE certified cotton stocks contracted by 1,497 bales on December 15, with overall certified inventory standing at 12,474 bales. The Adjusted World Price was recently refreshed at 50.39 cents/lb, marking an 89-point decline from the previous week’s level.

The Cotlook A Index slipped 10 points on 12/15, landing at 73.85 cents/lb, reflecting ongoing pressure on global benchmark pricing.

Physical Market Activity

Monday’s online auction activity through The Seam showed sales of 15,641 bales transacting at an average price of 59.57 cents/lb, indicating continued commercial interest despite recent price weakness.

Futures Contract Summary

Current session performance across major cotton contracts:

• Mar 26 Cotton: Closed at 63.1 (down 84 points), currently bouncing up 48 points
• May 26 Cotton: Closed at 64.26 (down 80 points), currently rallying 45 points
• Jul 26 Cotton: Closed at 65.38 (down 72 points), currently up 39 points

The consistent recovery pattern across all maturity months suggests a coordinated rebound rather than isolated strength in any single contract, reflecting broader sentiment shifts in the cotton complex.