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Yahoo
8 hours ago
- Business
- Yahoo
Can Cotton Break Out from Its Bearish Trend?
Cotton futures on the Intercontinental Exchange edged 0.82% lower in Q2 and were 3.10% lower over the first half of 2025, with the nearby futures contract settling at 66.28 cents per pound on June 30, 2025. In my Q2 2025 Barchart report on soft commodities, I concluded with: More News from Barchart Coffee Prices Settle Lower on Tariff Woes Tariff Turmoil Weighs on Coffee Prices The Bullish Cattle Stampede Rumbles On. Here's What to Watch Next After Record Cattle Highs. Markets move fast. Keep up by reading our FREE midday Barchart Brief newsletter for exclusive charts, analysis, and headlines. Sugar and cotton futures remain under pressure, making lower highs and lower lows. However, the world sugar and cotton futures offer more value than the other softs, as prices are nowhere near historical highs. As the soft commodities are now in the second half of 2025, underperformance compared to the other commodity sectors continues, following a period in which softs led the asset class in 2023 and 2024. Commodity cyclicality is a powerful force. If sugar and cotton prices continue to reach lower lows, they could be excellent candidates for recovery, as low prices cause production and inventories to decline, leading to increased consumption and significant price bottoms. At over 67 cents per pound in early August, cotton prices have risen marginally. However, we may have to wait until 2026 before cotton can break higher from its current bearish trend. A bearish trend since 2022 Cotton futures reached a multi-year $1.5595 per pound high in May 2022 when they ran out of upside steam. The monthly continuous ICE cotton futures chart illustrates the bearish trend of lower highs and lower lows, reaching a low of 60.80 cents per pound in April 2025. At around 67 cents in August 2025, the fluffy fiber futures remain not far above the most recent low and in a bearish trend. Sideways trading and consolidation in 2025 Active month December ICE cotton futures have traded in a sideways range with a bearish bias in 2025. The daily year-to-date December cotton futures chart highlights the 64.24 to 70.93 2025 trading range. While cotton has remained in a bearish trend since 2022, the agricultural commodity's price has gone nowhere fast in 2025. Cotton fundamentals In its July World Agricultural Supply and Demand Estimates Report, the USDA told the cotton market the following: The USDA increased its forecast for ending cotton inventories for 2025/2026, while it left the upland price projection unchanged at 62 cents per pound. The report was bearish, suggesting that global cotton production was sufficient to meet the worldwide demand. Meanwhile, U.S. tariffs could alter cotton's fundamentals as the trade barriers can distort prices. However, in early August 2025, cotton remains in a multi-year bearish trend with prices near the low end of the trading range. Levels to watch in the cotton futures market The weekly cotton chart highlights the critical technical levels for the coming months and into 2026. The weekly continuous contract chart shows that technical support is at the low of 60.80 from the week of March 31, 2025, with technical resistance at the high of 74.55 cents per pound from the week of September 23, 2024. While cotton remains within the current range, selling rallies above 70 cents and buying weakness towards the 60 cents level could be the optimal trading strategy. Look to buy for 2026 if cotton makes lower lows over the coming months- Commodity cyclicality Any price weakness that takes cotton to or below 60 cents per pound could be a great opportunity to load up on the fiber for spring 2026. Bullish cotton trends tend to reach annual highs in spring and early summer. The 2011 high of $2.1970 per pound occurred in May. Cotton reached annual highs above the 90 cents level in March 2014 and June 2018 and rallied to a high of $1.5595 in May 2022. Cotton's seasonal highs tend to occur during the uncertainty of the annual crop years during the spring planting season. At 60 cents or below, cotton offers value for the coming spring, as the cure for low cotton prices is those low prices themselves. At depressed levels, production tends to decline, inventories drop, and consumption increases, leading to price bottoms and subsequent price recoveries. After three years of bearish price action, with prices near the 60 cents level, the odds of a recovery developing next spring are high. Buying cotton futures for spring or summer 2026 delivery may be optimal, as the price limits downside potential and the level offers significant value. There are no cotton ETF or ETN products, so the futures are the only option for investment or a trading position. Each ICE cotton futures contract contains 50,000 pounds of the fluffy fiber. At 67 cents per pound, the contract value is $33,500. The current original margin requirement of $1,771 per contract means that a market participant can control $33,000 worth of cotton futures with a 5.3% down payment. If equity falls below $1,610 per contract, the exchange requires maintenance margin payments. Commodity cyclicality could favor cotton in 2026 as the price has declined to a level that limits downside risk. Rallies over the past years show that the upside potential could be far higher than the current price level. From a risk-reward perspective, building a long position in cotton on a scale-down basis from the 65 cents per pound level could make sense for 2026. The forward cotton curve shows that cotton for March and May 2026 delivery is trading at 68.36 and 69.63 cents, respectively. At lower levels, these contracts could offer value with limited risk for the coming year. On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
5 days ago
- Business
- Reuters
Commodities Market Headlines Breaking Stock Market News
Name Expiration Last Change % Change trading lower NYMEX Crude Oil CLc1 Aug 19 66.99 USD -0.34 -0.50%Negative trading lower ICE Brent Crude LCOc1 Aug 28 69.31 USD -0.36 -0.52%Negative trading lower NYMEX RBOB Gasoline RBc1 Aug 28 2.10 USD -0.02 -0.72%Negative trading lower ICE Gas Oil LGOc1 Aug 11 676.75 USD -5.00 -0.73%Negative trading lower NYMEX No2 Heating Oil HOc1 Aug 28 2.28 USD -0.02 -0.80%Negative trading lower NYMEX Nat Gas NGc1 Aug 26 3.05 USD -0.04 -1.14%Negative trading lower ICE NBP Nat Gas NGLNMc1 Aug 27 83.43 GBP -0.45 -0.54%Negative
