Summary
Commodity markets have hit another bout of a Trump induced volatility as the bombing campaign of Iran resumed. As one would expect energy markets in particular EU gas rallied hard with many countries severely impacted by the potential disruptions to supplies.
Crude oil has been noticeably stronger, and the curve structure has increased its inversion as the market attempts to price how long supply will be impacted.
Precious metals initially responded positively but sold off very hard on Tuesday 3rd March. Pretty much every PGM chart looks like a train wreck now.
For the soft commodities, things were a lot less exciting with cotton giving back a chunk of its recent gains and the coffee curve still coming to terms with a pending wave of supply from Brazil.
Cotton
Cotton Price Action
Cotton had started to find some support on the back of improving export sales, talk of the BACA getting approved and of impending lower production in the US, Brazil and Australia. However, there is still an abundance of stock available at destination in India and carry out levels in the US and Brazil are still comfortable. We are getting closer to the cotton market transitioning out of a bear market, but that is more likely to be a 2026/27 crop year story.
ICE Cotton No.2 front month:
Spreads (N/Z):
Cotton Positioning
CFTC Managed Money: Reduced their short, but the gross short is still very large. See the Softs Positioning table at the bottom of this report.
US Cotton Export & Sales
US Cotton Exports, despite a brief uptick, continue to be behind schedule to meet the USDA’s target. We are at week 29 of the marketing year, there is some time left, however based the data available right now, we project that the US is expected to export ~10.9 million bales by the end of the marketing year. The February WASDE revised the export number down from 12.2 million bales to 12 million bales, even then based on today’s numbers and current pace we are behind by 1.1 million bales. China has begun to appear within the weekly export numbers, still well below last year, while Vietnam’s imports are close to double the previous marketing year. This highlights the movement of trade flows and products up and down the value chain to avoid tariffs or to take advantage of preferential tariffs.
Cotton On-Call
No major outliers in the report other than there remains a large number of OC purchases in the new crop December contract.
Outlook for Cotton
Bull Case
BACA is passed and the current crop US balance sheet is impacted
Supply cuts deeper in Brazil and Australia
Bear Case
Demand takes a further hit from the war in the Middle East
Synthetic fibres continue to gain market share
Prices go too high too early and encourage planting for 2026/27 when the market does not need the extra supply at this point
Base Case
We continue to muddle through until planting decisions, growing weather and yields are made.
Whilst spreads stay in a wide carry, speculators have little incentive to go long the market and every incentive to stay short
From December 2026 contract onwards, the opportunities look better for 2H 2026.
Coffee
Coffee Price Action
Coffee prices have tried to find some stability after the steep sell off in February. The inversion in spreads continues to weaken, causing many momentum and spec-based longs to exit. Nearby supplies at destination remain tight until new crop Brazil start to hit the market. Diffs are generally under pressure except for Arabica in Brazil.
ICE Arabica front month:
ICE Robusta front month:
Arabica K/N
Robusta K/N
Physical Pricing
Brazil differentials: Robust has come off dramatically, whilst Arabica stays strong. Someone is obviously short those diffs!
Vietnam differentials: Starting to stabilise as the futures market sells off.
Certified stocks: slowly starting to rebuild.
Coffee Positioning:
For Arabica CFTC Managed Money: Longs steadily reducing and shorts getting slightly more confident.
For Robusta CFTC Managed Money: Longs steadily reducing and shorts getting slightly more confident.
Exports:
Brazil export pace: Much slower YoY due to smaller crop, tariffs and high differentials.
Colombia: Exports remain healthy.
Vietnam exports: Exports are healthy as demand ahead of the arrival of Conilons from Brazil.
Ugandan exports: Slowing down in a typical seasonal fashion
Outlook:
Bull Case
Another weather derived supply impact - frost anybody?
Geopolitics somehow impact supply chains further
Bear Case
Brazil crop comes online as expected
Roasters stay cautious with an uncertain macro environment
The Brazil farmer capitulates on their old crop.
Base Case
Not much different to the bear case. Supplies are tight in Brazil for Arabica but as we just saw with Conilon diffs, once the Brazil farmer is comfortable the next crop is going to be ok, expect the same to happen to Arabica differentials
this would put more pressure on the shape of the curve and flat price as we look to the Sep & Dec 2025 contracts.
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