US Cotton Futures Gain Ground Despite USDA Raising Production Outlook

US cotton markets displayed solid resilience on Tuesday as futures contracts posted meaningful gains across multiple timeframes. The rally occurred even as the U.S. Department of Agriculture released a report that boosted production forecasts, typically a bearish signal for prices. Mar 26 Cotton closed at 63.86, up 18 points, while May 26 Cotton gained 16 points to 64.92, and Jul 26 Cotton advanced 11 points to settle at 65.91. The persistent strength in US cotton suggest that other market factors are supporting the complex at this juncture.

USDA Production Adjustments Support Cautious Optimism

The USDA’s latest Crop Production report delivered mixed signals for US cotton stakeholders. While acreage estimates held steady, the agency increased yield projections by 10 pounds per acre to 929 lbs, a move that pushed total production up by 150,000 bales to reach 14.27 million bales. In the monthly World Agricultural Supply and Demand Estimates (WASDE), officials made targeted adjustments to unaccounted usage and domestic consumption figures. These refinements lifted projected ending stocks by 200,000 bales to 4.5 million. Despite these production gains, the cash average price for US cotton was pared back only modestly—trimmed by 2 cents to 60 cents per pound—indicating the market has largely absorbed the supply news.

Global Inventory Trends and Price Signals

World cotton stocks were essentially unchanged from previous estimates, with just a 40,000 bale increment recorded, settling at 75.97 million bales. This stability in global supplies provided psychological support to prices. Meanwhile, the Cotlook A Index, a key international price benchmark, slipped 25 points on December 8 to 73.95 cents, reflecting softer sentiment in overseas markets. The Adjusted World Price was refreshed to 51.28 cents per pound, representing a 51-point advance from the week prior, underscoring divergent regional pricing dynamics.

Ginning Data and Trader Positioning

Cotton ginning activity through early December revealed a 10.25% decline from the comparable period a year ago, with 8.645 million round bales processed as of December 1. This reduction in ginning pace may suggest slower harvest completion or reduced supply flow into the system. Commitment of Traders data for the week ending November 4 showed speculative traders trimming 10,311 contracts from their net short position, narrowing their bearish bets to 63,782 contracts. This lightening of speculative short exposure sometimes precedes price strength, as was evident in the day’s closing action.

Market Auction Activity and Exchange Inventory

The Seam’s online auction marketplace logged modest activity on Monday, with sales totaling 5,608 bales at an average price of 60.2 cents per pound. Physical market liquidity remains relatively subdued. ICE certified cotton stocks remained static on December 8, holding at 13,971 bales, maintaining the low inventory profile that has characterized recent sessions. These tight certified holdings could amplify volatility during delivery windows or sharp price moves.

Broader Commodity and Currency Environment

Headwinds from the energy complex provided some counterpressure to risk appetite. Crude oil futures declined 49 cents per barrel to $58.39 on the day, suggesting a pullback in demand-sensitive commodities. The U.S. dollar index, meanwhile, climbed 0.114 points to $99.175, which can weigh on dollar-denominated export commodities like US cotton by making them less competitive in international markets. The mixed backdrop of softer crude and a firmer dollar illustrates the complex interplay of macroeconomic forces influencing the cotton market.