I AM HAPPY I CAN REPORT that early new crop supply and demand estimates are offering a more favorable case for prices than the past three years. After two seasons of increasing global cotton stocks and huge increases in Brazilian cotton production, the potential exists for the 2026/2027 season to see a reversal of fortunes due to a solid recovery in global cotton consumption and prospects for reduced global cotton production. This way of thinking had already begun to influence market prices in early 2026 as reflected by a 10% premium for new crop futures versus old crops. But it was the outbreak of a serious, longer than expected conflict in the Middle East that has proven to be the spark needed to change the cotton marketplace’s mindset. The war with Iran has opened the gates for the cotton bulls a few months earlier than expected, setting off a significant unwinding of speculative bearish cotton futures market bets on old crop prices, relieving the market structure of underpriced growers, and perhaps most importantly, creating another wave of momentum similar to ones in the past that have made the cotton futures market infamous.

WHEN THE U.S. LAUNCHED OPERATION EPIC FURY in late February 2026, more favorable new crop prospects were on the horizon but still several months away. There was time for drought-stricken parts of the U.S. cotton belt to get relief and, more importantly, U.S. cotton stocks for the summer transition period were anticipated to be ample. The marketplace was fixated on the U.S. being the residual supplier to Brazil with its record production and a buildup of
unsold high-grade cotton in West Texas. The general view at that time was that over the coming months speculators would relinquish their strong-minded bearish bias towards cotton and at least move to a less convicted bearish view as new crop fundamentals became fully in focus. As it turned out, cotton would not wait for new crop fundamentals to play out once the fallout from the closure of the Strait of Hormuz was recognized as possibly being very relevant to the cotton and textile sector—not in the traditional negative sense but in a positive way. When the effect of the closure became evident, managed money speculators began exiting their massive short futures position that has set records in both terms of magnitude and tenor over the past 102 weeks. From March to early May 2026, managed money cotton futures market speculators bought an extraordinary 12-plus million bales of cotton futures and options, yet now only exceed their longterm “average” length by 2.5 million bales. With an outsized short position and a quick reversal of price psychology, the fundamental story for the cotton market quickly moved from current surplus to future deficit, and the pent-up supply of global grower selling that had acted as a lid on prices for two years was quickly cleaned out by speculator short covering.

BECAUSE YOU ARE READING THIS ARTICLE, you likely know that cotton’s number one competitor for clothing, home furnishings, and non-woven consumer products is polyester fiber. And, unlike much of the general public, you also likely know that polyester is essentially a flimsy plastic entirely derived from petrochemicals. Key ingredients for making polyester are monoethylene glycol (MEG) and purified terephthalic acid (PTA) or dimethyl terephthalate (DMT). These ingredients are sourced from para-xylene and ethylene, which are obtained from crude oil refining in the Middle East and travel through the Strait of Hormuz before they are turned into polyester fiber somewhere in the world (mainly China and Asia more broadly). Similar to oil, because the availability of polyester inputs is being constrained by the closure of the Strait of Hormuz, the price of polyester has increased sharply as a result of this supply interruption. This is important to cotton because it could mean a fundamental shift in the global fiber blend back towards cotton—an elusive, long-held aspiration of our industry. The global market for fiber is more than 550 million bale equivalents, and cotton is only about 20% of it. A portion of that market is not suited for cotton (although I think that can change in the longer-term future with new technologies currently under development), but even a small shift in cotton’s share of the overall market could mean a big increase in mills’ consumption of cotton. If cotton moves from 20% to 21%, that could mean a 5.5 million bale increase in annual consumption, an increase that could easily boost global cotton consumption over the previous high record of 124 million bales. Even if the switch is temporary, it comes at a time when world cotton production is setting up for a pullback based on poor grower profitability in recent years, weather, governmental policy, and another supply chain currently under duress because of the conflict with Iran—fertilizer. This potential boost in cotton consumption also comes at a time when the global textile supply chain is intentionally sitting on relatively lean inventories—restocking with caution because of tariffs, multi-year concerns over the “K-Shaped” economy, and with little concern over abrupt textile fiber supply availability or price appreciation.

JUST AS THE MONEY FLOW INTO AND OUT OF equity markets impacts stock prices, speculative investments in and out of the commodity markets have a major impact on price direction and relative levels. The fundamentals do matter for value in the end, but the average daily price for a commodity is heavily influenced by inflows and outflows of money that are often based on perceptions about the future. For the better part of three years, speculators have held a generally negative sentiment on row crops, particularly cotton. Central to their view has been increased agricultural production in the Southern Hemisphere, a strong U.S. dollar, weaker global demand growth, and the U.S. and China’s antagonistic trade relationship. The fundamentals generally ended up matching with speculative positioning, thus “the specs” were able to keep considerable pressure on prices through their relentless short bets on cotton futures. Growers and owners of anything made of cotton suffered through deflation and prices that could only go down or, at best, move sideways. When the conflict with Iran broke out, oil prices rose while stocks and commodities that are dependent upon discretionary spending, like cotton, were initially pressured.

THERE ARE SERIOUS CONCERNS over what high energy prices will do to global economic growth. But in recent weeks, futures speculators have come to the realization that because of the war with Iran, there are new risk dynamics and their long-held convictions may be becoming less valid. For all the row crop commodities, diesel and fertilizer availability and prices will likely crimp global production in yet unknown ways. Cotton specifically may pick up a little share from polyester either fully or partially offsetting any slowdown in retail spending. The Brazilian Real’s steady rise versus the broadly weaker U.S. dollar will remove some of the financial shield benefitting the ever-expanding Brazilian agricultural economy, and global weather may not be as friendly to global productivity as in recent years (especially with the fertilizer and weakening U.S. dollar situations also potentially impacting the production equation). Additionally, and perhaps most importantly, there are hopes for an improved trade relationship with China.

FOR NOW, ALL THE FACTORS MENTIONED ABOVE, plus much conjecture (some realistic and some perhaps not so much), are the new narrative about cotton and the row crop complex. These days more than ever across agricultural markets, when the narrative changes in a big way, so does the speculative money flow. Sometimes this is a good thing for the people who actually grow, merchandise, and use the products!

FOCUSING A LITTLE MORE ON THE LONGER TERM, I would be remiss if I were not to mention two very important industry initiatives that hold great promise in terms of building long-term structural demand for U.S. cotton: The Buying American Cotton Act (BACA) and the Plant not Plastics awareness initiative. If passed, BACA will take advantage of U.S. consumers’ retail purchasing power by creating a tax incentive for brands and retailers to require the use of more American cotton in apparel, home furnishings, and medical/industrial products they offer in the U.S. marketplace. The U.S. is the largest retail economy in the world, but as it stands now, more and more of the cotton-rich goods offered for sale in our country are made of foreign cotton. BACA is not designed exactly like the Renewable Fuel Standard that benefits grain and oilseed production, but the concept is similar. While BACA’s fate lies with the decision makers in D.C., our industry continues to make a strong case for the legislation, and we remain hopeful it will become law one day. Currently, BACA has bipartisan support (80 plus co-sponsors and growing). Staplcotn has been consistently involved in promoting the merits of this smart legislation for more than a year and we will continue to make the case for it. We encourage our members and their local cotton organizations to do the same.

THE NCC’S PLANT NOT PLASTIC CAMPAIGN is a cotton industry initiative that intends to educate consumers about how they can reduce microplastic pollution by choosing natural, biodegradable fibers like cotton over synthetic, fossil-fuel-derived materials. The campaign emphasizes that, unlike polyester and nylon, cotton
does not shed microplastics when worn or washed; thus it does not contribute to the microplastic pollution currently taking place in our bodies or the environment. The campaign is well complemented by society’s broadening concern over microplastics and will help to increase demand for cotton and promote better health and a cleaner, safer planet.

I WILL CLOSE NOT WITH A PREDICTION BUT A THOUGHT. Predictions about cotton’s future foster a strong narrative for cotton today, but the future ultimately holds the truth. After three extremely trying years in a row, let’s hope this season’s promise delivers and reminds us why we love being in the cotton business. For the long-term, our focus at Staplcotn will be an unwavering pursuit of stronger, more reliable markets for your cotton through legislation, promotion, and innovation so that growing cotton is a rewarding option for our members.