Cotton Futures Decline Amidst Lower Export Commitments

Cotton futures are losing ground, with notable losses in trade observed. The USDA Export Sales data reveals a concerning dip in upland cotton commitments, which could signal challenges ahead. Analysts are anticipating tentatively planted acres for the upcoming planting report.

Date: 29-03-2025

AI Rating: 5

Market Context: The recent report indicates that cotton futures are experiencing notable losses, with declines ranging from 21 to 32 points. Alongside this, crude oil futures have fallen, and the US dollar is down, potentially indicating a broad market weakness.

USDA Export Data: It was reported that the USDA's commitments for upland cotton stood at 10.309 million RB, which is a 5% decrease compared to last year. This figure represents 100% of the USDA's export forecast for 2024/25, but is marginally behind the average of 101%. Such a decline in export commitments may have adverse effects because it could reflect lower demand or increased competition, impacting revenue streams for cotton producers.

Planting Data Insights: Analysts are estimating that Monday's Prospective Planting report may show around 9.9 million acres dedicated to cotton with a range of estimates from 8.8 to 10.5 million acres. The size of the cotton acreage can affect supply levels directly and consequently impact prices in both the short and medium term.

Market Outlook: The cotton market is reportedly still adjusting, with selling averages showing a decrease in prices, as illustrated by the reported online sales of 9,181 bales at an average of 60.15 cents/lb. The reduced Adjusted World Price (AWP) at 53.66 cents/lb accentuates the downward price pressure on cotton. A continued decline in these performance metrics raises implications for profit margins.

Overall, whilst there are no specifics on earnings, net income, or return on equity in the report, the decline in export commitments and the volatility in planting acreage projections could signal a bearish sentiment for cotton futures in the medium term.

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