Author: Don Shurley, Emeritus UGA Crop Economist
Cotton prices (December 2026 futures), that were range bound between 66 and 70¢ for a long time, have finally broken that barrier and now stand at over 80¢. Prices have improved roughly 12 ½¢ (or 18%) over the past 7 to 8 weeks or so.
Let’s remember two basic principles of market action: buying (any kind of buying—actual commodity or futures contract speculator) pushes price higher and selling (any kind of selling—the actual commodity or a futures contract speculator) pulls price lower. It’s the market forces of pushing and pulling.
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So, prices have increased significantly and did so rather quickly. Why? Because the market became believers in buying—the actual commodity, contracts, or speculators to make money on a perceived run-up and sell higher. What stops the train? The market becoming believers in selling—the actual commodity or selling contracts to take profits from buying lower.To push price higher, and for higher prices to be sustainable at a higher level, there must be economic forces that convince the market to be buyers. This could be increased/better demand, short crop or crop concerns. If and when crop concerns subside, the degree of push likely also subsides and price declines.
These market principles are important and start us thinking, but that’s enough (more than enough) economics for now. Let’s talk real world. The major mover in price is the drought and its potential for cutting into U.S. supply. Demand/Use/Exports are still a factor, but supply side concerns have taken over simply because drought has become so dominant.
Over the past month, drought has intensified especially in the Southeast and Mid-South. Some parts of Texas appear to have improved, some have not or has worsened. The latest data shows that 98% of cotton area has some degree of drought.
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This becomes critical as we approach peak planting times. Even if drought areas get rain, how much, and will it do anything but short-term good? Could planting be delayed waiting for moisture conditions to improve and, if so, what impact does that have?
The 1-month outlook for May suggests that rainfall will likely be normal to above normal for cotton areas. If this happens, if prices are still 80+, will that weaken the “push”. Clearly, I think that depends on other factors in play at the time.
USDA’s April monthly supply/demand estimates for the 2025 crop marketing year were unremarkable. Compared to the March numbers, World production was raised about 1 million bales. Use was raised about 600,000 bales. China’s Use and imports were both raised slightly. U.S. exports for the 2025 crop marketing year ending July 31 were unchanged from the March projection.
Exports for the most recent two weeks released have averaged 315,000 bales. This level should be supportive of prices. Shipments need to average 300,600 bales per week for the remainder of the marketing year. Total shipments thus far total 7.49 million bales. A good export pace combined with the prospects of a drought-shortened crop should help prices. If crop concerns dimmish and/or exports cool off, price may also.
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Pricing
December 26 futures are at 80¢ – Should you lock-it in? I’ve been getting that question. If you’re inclined to contract, you could at least do a little of expected production. But, given the drought and planting conditions, some growers are choosing to wait and take the risk on price and not contract until they know the crop better. Price is especially important this year. Growers are financially stressed and price can be the difference. Every cent is important. If you feel like you need to protect from price going back down, you can start contracting to achieve what hopefully will be a high average, or use Put Options instead, or contract in combination with a Call Option.
Falling back to 70 cents—seems like that would be impossible-but “adjustments” can and do happen in market push and pull. Right now, attention is mostly on the drought. Geopolitical forces also loom large in the background.
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