Cotton Prices Slip Despite Bullish USDA Supply Revisions as US Production Falls to 13.175 Million Bales

Today Markets Analysis

US cotton futures closed slightly lower on Tuesday, with losses ranging from 6 to 9 points in the most actively traded contracts, despite a supportive USDA supply outlook showing reduced production and lower projected ending stocks. The latest figures pointed to tightening US cotton availability, but the market failed to translate the improved supply picture into higher prices.

December 2026 cotton settled at 78.69 cents per pound, down 9 points, while March 2027 finished at 82.51 cents and May 2027 at 84.09 cents per pound. A stronger US dollar and weakness in crude oil provided a less supportive external backdrop, helping limit buying interest despite the reduction in projected US production.

Market Snapshot

Cotton Futures Remain Under Pressure

Cotton futures recorded modest losses across the board, with December 2026 and March 2027 contracts each declining by 9 points. May 2027 cotton finished 6 points lower.

The declines came despite the latest USDA figures indicating a reduction in expected US production and ending stocks. This suggests that the improved domestic supply outlook was not sufficient to generate sustained buying interest during the session.

External market conditions also offered limited support. Crude oil declined by $0.41 per barrel, while the US Dollar Index advanced by 0.615 points. A stronger dollar can make US cotton less competitive for overseas buyers, while weaker crude oil can influence sentiment across the wider agricultural and synthetic-fibre markets.

USDA Cuts US Cotton Production and Yield

The latest USDA Crop Production figures delivered a supportive adjustment to the US cotton balance sheet.

The projected US cotton yield was reduced by 15 pounds per acre to 775 pounds per acre. Production was also cut by 267,000 bales to 13.175 million bales.

The WASDE report showed domestic cotton use reduced by 100,000 bales. However, the production reduction was sufficient to bring projected US ending stocks down by 100,000 bales to 3.7 million bales.

The lower production estimate is an important development for the market, as it reduces the expected availability of US cotton. However, the adjustment in domestic consumption indicates that demand projections remain a consideration when assessing the overall balance between supply and use.

Cotton Ginnings Show Significant Year-on-Year Decline

US cotton ginning figures provide further evidence of a smaller crop moving through the processing system.

Approximately 2.05 million running bales were ginned during the final two weeks of October, bringing the marketing-year total to 3.7 million running bales as of November 1.

That figure is 898,000 running bales below the corresponding period last year and represents a three-year low.

The lower cumulative ginning total is an important indicator for traders monitoring the pace of the US harvest and the amount of cotton entering the market. Continued weakness in ginning figures could reinforce concerns about available supplies, although the relationship between ginning progress and final production will remain under scrutiny.

Physical Cotton Market and Certified Stocks

Activity in the physical market remained visible, with The Seam reporting 6,182 bales sold on Monday at an average price of 81.94 cents per pound.

The Cotlook A Index increased by 30 points on November 9 to 90.70 cents per pound, indicating a firmer international price reference.

ICE certified cotton stocks declined by 345 bales on November 9, reflecting a combination of new certifications and decertifications. The resulting certified stock level stood at 75,380 bales.

Meanwhile, the Adjusted World Price fell by 94 points from the previous week to 63.57 cents per pound.

These indicators provide a mixed picture of the physical market. The higher Cotlook A Index offers a firmer international reference, while the reduction in ICE certified stocks and lower Adjusted World Price provide additional data points for traders assessing physical availability and US cotton competitiveness.

Bullish Sentiment for Cotton

1. US production reduced: The USDA cut its US production estimate by 267,000 bales to 13.175 million, tightening the projected supply outlook.
2. Lower yield forecast: The reduction in yield to 775 pounds per acre points to weaker expected output per acre.
3. Ending stocks decline: Projected US ending stocks fell by 100,000 bales to 3.7 million, reflecting the production adjustment.
4. Ginnings at a three-year low: Cumulative ginnings of 3.7 million running bales were 898,000 below the same period last year.
5. Cotlook A Index strengthens: The international benchmark rose 30 points to 90.70 cents per pound.

Bearish Sentiment for Cotton

1. Futures close lower: December and March contracts both lost 9 points, showing that the supportive USDA revisions failed to generate an immediate rally.
2. US dollar strengthens: The 0.615-point increase in the Dollar Index creates a potentially less favourable environment for US export competitiveness.
3. Crude oil declines: A $0.41-per-barrel decline in crude oil added to the softer external market backdrop.
4. Domestic use reduced: The USDA lowered projected domestic consumption by 100,000 bales, tempering the otherwise supportive supply revisions.
5. Adjusted World Price falls: The weekly decline of 94 points to 63.57 cents per pound provides a weaker domestic pricing reference.

Cotton Price Forecast: What Traders Are Watching

The immediate focus is whether the lower US production and ending-stock estimates can provide sufficient support to stabilise futures prices.

Traders will be watching subsequent USDA supply and demand updates, US harvest progress, export activity and physical-market demand. The pace of ginning will also remain important, particularly given the substantial year-on-year reduction recorded through November 1.

International price direction will be another key influence. The Cotlook A Index has moved higher, but a stronger US dollar could complicate the competitiveness of American cotton in export markets.

US Cotton Supply Outlook

The reduction in projected production to 13.175 million bales and the decline in ending stocks to 3.7 million bales provide a tighter US supply outlook than previously anticipated.

The lower ginning total reinforces the need to monitor the pace of crop movement and final production estimates. If subsequent data confirms the reduced supply picture, it could provide underlying support for cotton futures.

However, the reduction in projected domestic use means the demand side of the balance sheet cannot be overlooked.

Cotton Demand Outlook

Demand remains a critical factor in determining whether the latest supply revisions can translate into a sustained recovery in futures.

The lower domestic-use projection highlights the importance of consumption trends, while export demand and international price competitiveness will remain central to the outlook.

The Cotlook A Index’s latest increase provides a firmer international reference, although the stronger dollar could weigh on US export prospects if it persists.

Market Outlook for the Coming Sessions

Cotton remains caught between a tightening US supply outlook and a market environment that has yet to reward the latest bullish USDA revisions.

The reduction in production, lower yield estimate, three-year low in cumulative ginnings and declining ending stocks all provide supportive fundamental signals. Nevertheless, the latest futures close shows that traders remain cautious, with currency strength and weaker crude oil adding pressure.

For the coming sessions, attention will centre on whether the December contract can stabilise around the 78.69-cent level and whether the March and May 2027 contracts can maintain their respective positions above 82 and 84 cents.

A continuation of supportive supply data, combined with stronger physical demand, could improve the outlook. Conversely, subdued consumption, a firmer dollar and continued selling pressure could keep cotton futures vulnerable.

The central question for the market is whether tightening US supplies will ultimately outweigh concerns about demand and broader financial-market conditions.

Currency Hedger – Contributor

Currency Hedger provides international payment solutions, multi-currency accounts and foreign exchange risk management services for businesses operating across global markets.

Open an account: https://currencyhedger.numito.com/onboarding
Visit: https://currencyhedger.com/

Disclaimer: This article is provided for informational and market commentary purposes only. It does not constitute investment advice, financial advice or a recommendation to buy or sell any financial instrument. Commodity futures involve significant risk and may not be suitable for all investors. Readers should conduct their own research and consider their financial circumstances before making trading decisions.

Register a Revolut Business Account