US Cotton Rebounds as Trump-Modi Trade Deal Signals Opportunity

US cotton futures staged a modest recovery at midday on January 30, despite broad commodity weakness across global markets. After diving sharply in early trading, the contracts trimmed their losses, with March delivery falling 15 points to 63.02 cents/lb, May contracts declining 17 points to 64.76 cents/lb, and July futures slipping 14 points to 66.41 cents/lb. The pullback came amid a significant political development: President Trump announced through Truth Social that his call with India’s President Modi had yielded promising results for US agricultural exporters.

Market Dynamics and Policy Impact

The centerpiece of the Trump-Modi discussion was a dramatic reduction in US tariffs on Indian goods—dropping from 25% to just 18%—coupled with India’s commitment to purchase over $500 billion in US energy, technology, agricultural products, coal, and related commodities. This agreement holds particular significance for US cotton producers, as India has historically ranked among the top eight purchasers of American cotton. The prospect of expanded market access in such a major buyer nation provided a psychological lift to cotton prices, even as other macro headwinds persisted.

The broader commodity complex reflected mixed signals. Crude oil futures declined $3.39 to settle near $61.82 per barrel, while the US dollar index strengthened 0.641 points to 97.500. The stronger dollar typically pressures export-oriented commodities like cotton by making American goods more expensive for foreign buyers—a dynamic partially offset by the tariff concessions and purchasing pledges.

Trading Sentiment and Market Structure

Institutional investors signaled caution through their positioning. According to the Commitment of Traders report released Friday, managed money investors added 13,077 contracts to their net short position as of January 27, expanding the total to 65,029 contracts. This elevated short positioning reflects concerns about demand and suggests traders are hedging against further price deterioration.

Physical market activity revealed softer underlying demand. The Seam’s online cotton auction posted sales of 56.571 cents per pound across 4,462 bales—levels reflecting the competitive pressure cotton has faced. The Cotlook A Index, a widely watched international price benchmark, retreated 20 points to 73.95 cents on January 30. Meanwhile, the Adjusted World Price dropped 76 points from the prior week, settling at 50.23 cents per pound as of Thursday afternoon.

Storage and Supply Landscape

ICE certified cotton inventories expanded by 25,666 bales on January 30, bringing total certified stocks to 34,226 bales. Rising storage levels traditionally signal weak demand absorption and can weigh on prices, though the recent policy developments may influence how aggressively these supplies are absorbed in coming weeks. The interplay between inventory management and the potential demand boost from India’s stated purchasing intentions will likely dominate cotton trading dynamics through February and beyond.