Wed, Mar 18,
Insights
ICE cotton futures extended gains on strong buying interest and continued short covering, with May 2026 settling at 68.77 cents per pound.
Support came from improved global sentiment, China's import outlook and a weaker US dollar.
However, prices eased after hitting multi-month highs.
Weather risks, lower India import estimates and firm crude oil also supported bullish sentiment.
ICE cotton futures continued to rally on yesterday. US cotton prices extended rally, supported by continued buying interest and improving technical momentum. The market held gains throughout session without major profit booking. However, ICE cotton futures retreated today after hitting multi-months highs.
The most traded May 2026 contract settled at 68.77 cents per pound, up 0.58 cent or 0.85 per cent. May contracts had hit earlier an intraday of 68.75 cents, the highest level since July 2025.
Strong short covering dominated the market as speculators reduced bearish exposure. Fund managers actively exiting short positions built over past 5–6 months, many now under loss pressure. Market positioning shifting from heavily bearish towards neutral as shorts continue to unwind.
CFTC data for week ending March 10 showed net short positions reduced by 9,793 contracts. Net short position declined to 33,488 contracts, lowest level in recent weeks. This marks third consecutive weekly reduction, indicating sustained short covering trend. Decline in open interest on short side reflecting liquidation rather than fresh selling.
China’s fresh import quota announcement improved global trade sentiment. Expectations of higher Chinese buying supported international cotton prices. Global demand outlook shows signs of recovery after recent weakness. Trade participants are expecting better export activity in the coming weeks.
Around 88 per cent of US cotton-growing areas are currently under drought conditions, with severe dryness reported across key producing states, including Texas. March weather has been marked by record high temperatures and extremely low rainfall, leading to declining soil moisture levels and raising early concerns for the planting season. The weather outlook indicates a continuation of hot and dry conditions, with temperatures expected to remain significantly above normal over the weekend.
Cotton Association of India (CAI) cut import estimate by 300,000 bales. Revised India’s import projection for 2025-26 placed at 4.7 million bales. Earlier estimate was around 5 million bales, showing downward revision.
Higher global cotton prices are making imports less attractive for Indian mills, while the depreciation of the rupee is further increasing the landed cost. Rising freight rates, driven by geopolitical tensions in West Asia, are also impacting trade flows. The reduced import outlook may tighten domestic availability and lend support to local cotton prices.
NYMEX crude oil futures closed higher amid supply concerns and geopolitical risks. Higher crude prices increase polyester production costs, a key substitute for cotton, thereby improving cotton’s competitiveness. CBOT soybean futures also gained, tracking strength in crude oil, while the broader commodity rally supported positive sentiment in cotton markets.
The US dollar remained relatively weak, enhancing the competitiveness of US cotton exports and encouraging commodity buying by global investors. Overall market sentiment remains bullish in the short term, driven by short covering, weather risks and supportive macro factors. However, further upside will depend on sustained fund buying, weather developments and export demand trends.
This morning (Indian Standard Time), ICE cotton for May 2026 was traded at 68.49 cents per pound (down 0.28 cent), cash cotton at 66.77 cents (unchanged), the July 2026 contract at 70.45 cents (down 0.30 cent), the October 2026 contract at 71.81 cents (down 0.49 cent), the December 2026 at 72.44 cents (down 0.21 cent) and the March 2027 contract at 73.28 cents (down 0.21 cent)). A few contracts remained at their previous closing levels, with no trading recorded so far today.