Cotton futures retreat as dollar strength and speculative selling weigh on prices
Speculative funds reduce net long positions while a stronger US dollar and falling crude oil prices add to downward momentum in cotton markets.
Cotton futures experienced a broad decline on Friday, with contract prices dropping between 41 and 137 points across the board. July contracts recorded the steepest fall, shedding 240 points, while other near-term contracts also posted losses. The downturn was driven by a combination of macroeconomic headwinds and reduced speculative interest in the commodity.
Market pressure was amplified by a strengthening US dollar, which rose by $0.643 to reach 100.025. A stronger dollar typically makes dollar-denominated commodities more expensive for holders of other currencies, dampening demand. Additionally, crude oil prices fell by $2.79, contributing modest downward pressure to the broader commodity complex.
Weekly data from the US Commodity Futures Trading Commission (CFTC) revealed that speculative funds trimmed their exposure to cotton. As of June 2, speculators reduced their net long positions in cotton futures and options by 1,798 contracts. This reduction brought the total net long position to 52,402 contracts, indicating a shift in sentiment among traders.
Despite the price weakness, underlying trade data showed resilience in export activity. The USDA reported 11.33 million ring bales of cotton export business, a figure that represented 101% of the USDA export projection. While this volume was 8 percentage points below the normal pace, it remained only 1% lower than the same week last year. Shipments totalled 8.883 million ring bales, sitting near the 80% average pace.
In the physical market, the Cotlook A Index remained unchanged on Thursday at 87.50 cents. The Adjusted World Price fell by 29 points to 63.20 cents per pound. ICE certified cotton stocks decreased by 4,592 bales on June 4, bringing the total certified stocks level to 250,429 bales. Specific contract closures for the period saw July 2026 cotton close at 73.75, down 114 points, while December 2026 and March 2027 contracts closed at 77.48 and 78.8 respectively, both down 101 points.
