ICE Cotton Futures Remain Under Pressure; Rising Certified Stocks and Speculative Liquidation Weigh on Market Sentiment

Dual headwinds from climbing certified stocks and speculative liquidation have dragged ICE cotton futures into a sluggish trend recently, weighing heavily on market sentiment. Analysts commented that export demand still offers some support, yet expectations of ample supply have gradually taken hold, exerting notable downward pressure on nearby contracts approaching delivery.

On June 9, ICE cotton futures closed mixed. The July contract fell 0.36 US cents to settle at 73.39 US cents per pound, while the December contract edged up 0.13 US cents to 77.61 US cents per pound. The stark divergence between persistently pressured near-month contracts and mildly rebounding far-month contracts reflects far greater market worries over short-term supply strains versus long-term outlooks.

Trading volume hit 92,029 lots, yet open interest retreated by 9,039 lots day-on-day to 310,835 lots.

Sustained speculative liquidation stands as the primary resistance plaguing the market at present. CFTC positioning data revealed that managed money traders posted net selling for the second consecutive week, with fund liquidations serving as the core driver of persistent downward pressure. Speculators built substantial long positions between February and March; however, the recent price pullback prompted late entrants to lock in profits, amplifying bearish momentum across the market.

Steadily rising certified stocks have also dampened market sentiment. Official data showed ICE certified cotton stocks rose by 4,031 bales on May 26 to 225,155 bales. Analysts noted swelling inventories represent the most bearish fundamental factor for the July contract. Ample deliverable stock levels have eased fears of near-term supply tightness and severely eroded bullish confidence.

Improved U.S. crop conditions have further entrenched bearish market expectations. The USDA’s first weekly crop progress report stated that as of the week ending June 7, 53% of the U.S. cotton crop was rated good/excellent, well above the 49% seen in the same period last year; planting progress reached 77%, compared with 75% a year prior. Timely rainfall in key producing states including Texas has improved soil moisture, steadily erasing weather risk premiums priced into the market.

Trading metrics signal a phase of large-scale fund liquidation across the market. Open interest dropped by 3,587 lots to 319,874 lots for the week ending June 5, before sliding further to 310,835 lots by June 8. Meanwhile, trading activity expanded consistently: volume reached 92,029 lots on June 8, an increase of 3,607 lots from the prior session. The combination of rising volume and falling open interest points to strong willingness among long holders to exit positions, putting the market in a defensive mood.

That said, the market is not devoid of supportive factors. The USDA Export Sales Report reported net export sales of U.S. upland cotton surged by 185,268 bales in the week ending May 28, a 21% week-on-week increase. Additionally, the upcoming monthly USDA Supply and Demand Report due this week and the June 30 Planted Acreage Report will emerge as new market focal points, with traders closely tracking any revisions to U.S. and global supply-demand balance sheets.

Overall, ICE cotton futures retain a bearish near-term outlook amid three bearish forces: mounting certified stocks, accelerating speculative liquidation and improving crop health, with the July contract facing far heavier selling pressure. Whether the market can stabilize in the short term hinges on whether the upcoming key official reports can deliver fresh bullish trading catalysts.