Weak Demand Dims Cotton Price Outlook

Forrest Laws, Contributor

O.A. Cleveland is trying to be bullish on cotton, almost willing futures prices to move out of their four-month trading range of 65.50 to 67.50 cents per pound, which is far below most growers' cost of production. But, the professor emeritus at Mississippi State University, long known as one of the most perennially bullish cotton analysts, says he "just can't get there" no matter how hard he tries.

Over the last two months, USDA reduced its estimate of the U.S. cotton crop by 1.3 million bales, or nearly 10%. It also forecast world ending stocks would be the lowest since 2010-11, and world cotton carryover would be the lowest since 2014-15 because of lower production in several countries.

"In the past, if we had production declines like we're seeing, the market would have been limit up," Cleveland points out. "And, we see production declines that historically would have resulted in a strong movement higher, and [instead] the market comes down."

The August report also revised acreage lower, mostly in Georgia and Texas, explains Don Shurley, professor of economics emeritus at the University of Georgia. "In the September report, expected U.S. production was raised just slightly. Through all this, the market seemed not to care." (Texas was reduced 440,000 acres, and Georgia, 160,000.)

"Prices have not improved and, if anything, have gotten weaker," he adds. "Although acreage has been reduced, crop condition has generally been favorable, and it could be the market is viewing this as offsetting some of the reduction in acres."

DEMAND DOLDRUMS

Cleveland and Shurley point to another factor -- reduced demand for cotton fabrics -- while the world cotton market has become more competitive, as countries such as Brazil have tripled their cotton production in the last 10 years.

"U.S. exports for the 2025 crop year were also reduced by 500,000 bales," Shurley adds. "It's hard to see prices making much improvement over the next few months unless: 1) the crop is reduced again, or 2) the outlook for demand improves."

"We're seeing December 2026 futures at 70 cents," says Cleveland, who continues to write market commentaries and participates in the monthly "AgMarket Network Cotton Roundtable." "Unfortunately, for the past 18 months, we have seen the distant futures contract price fall to the expiring futures price. And, that's symbolic of the lack of demand we have."

The low prices could lead to a decline in acreage in China or India, he notes. "However, Brazil tells us that their 2026 acreage could be 3% higher than 2025. They have increased their acreage by more than 100% in 10 years."

Meanwhile, China is buying less cotton. "Granted, China has farmed out some of their domestic production to Vietnam, Cambodia, Bangladesh and other lower-wage countries," Cleveland states. "We're getting a portion of that market, but we are losing share in all of our export markets, primarily to Brazil.

"We have lost our comparative advantage of being the low-cost producer," he stresses. "Brazil grows cotton for at least a nickel a pound less than we do."

FEWER ACRES?

What will producers faced with such a bleak outlook plant in 2026? Shurley says he's predicting Georgia growers will reduce acres as they did in 2025 or remain at about the same acreage as this year. (Shurley also writes weekly market commentaries.)

"Our main alternatives are corn or peanuts," he notes. "Soybeans can be an alternative in some situations, but I think it's beyond acreage decisions for some growers. Two years in a row like this is more than some farm businesses can withstand."

John Robinson, professor and Extension specialist for cotton marketing at Texas A&M University, says many Texas growers will continue to plant cotton because of the current lack of viable alternatives.

"The U.S. might have planted less than 9 million acres this year if the corn market had been strong. We would have had a big swing out of cotton, but we didn't because the corn market was terrible. Will grain markets be higher next year? My corn vs. cotton ratio suggests we'll have 10 million cotton acres planted instead of 9.0 or 8.5."

PRICE PROSPECTS

The economists agree pricing the 2026 crop at the current levels offered by ICE (Intercontinental Exchange) futures would be premature, guaranteeing growers would be locking in a loss.

"Even if the outlook is projected to be weak, there's always a range within that year," Robinson explains. "Typically, the seasonal pattern is the highest prices happen between March and early June.

"I tell growers if you've decided to plant cotton, you really need to consider forward-pricing or hedging at that time of year. If the price is 69 or 72 cents, they'll say that's not enough. I'm not saying sell your whole crop, but if you make the decision to plant it, you need to consider pricing it in chunks when prices are historically the highest."

One caveat is the weather. DTN is forecasting La Nina conditions to continue into winter 2025-26, an event that usually favors drier than normal weather over the primary cotton areas from California through the Carolinas and everywhere in between.

"If it persists into the first quarter, it could impact the cotton in west-central and northwestern Texas with much higher abandonment than currently assumed," Robinson adds. "And, although China has been reducing consumption, other countries could buy more if the economy doesn't weaken.

"I heard a talk [recently] that said U.S. consumers have been buying apparel at a good clip," he notes. "Retailers have been understocked. So, there's a gap in inventory that may have to be made up because they don't have as much as they did pre-COVID."

Shurley says options can help. "They're not a perfect solution, and nothing is. Suppose you bought a Dec. 26 put with a strike price at 70 cents. This might cost 4.5 cents, so you would be locking in a 'floor' at 65.5 cents basis December. But, you could sell at a higher price if the market goes up."

The economists also agree efforts such as the National Cotton Council's new campaign against microplastics could help. "Until we do something about demand, I don't see prices getting much better," Cleveland says.

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