The war in Iran continues, and there is a strong possibility of creep in the commitment of the U.S. If anything, the market has yet to fully price in the reality of a prolonged closure of the Strait of Hormuz, which is now effectively shut to commercial traffic, not merely at risk. The backwardation has increased, and I would expect it to steepen further as the U.S. becomes more entangled in Iran.

Over the past week, downstream products have begun to price in a structurally higher oil price. Freight has become notably more expensive, and following on from this, urea is higher. Important petrochemical intermediates such as xylene, PTA, PP, and the product we are most interested in PSF (Polyester Staple Fiber) have all been bid up on the Chinese ZCE exchange.

The Chinese cotton market has had the double whammy of a surprise cut to forecast acreage for 26/27 and the prospect that China will no longer have a cheap, reliable source of Iranian crude as petrochemical feedstock. This is why, despite still less-than-impressive export numbers, right now, U.S. Cotton will start to become interesting…

Cotton has started to carve out some support, helped by better export sales, renewed talk of BACA moving through Congress, and the prospect of smaller crops in the U.S., Brazil, and Australia. That said, the March WASDE leaned bearish, with USDA lifting global production by more than one million bales while shaving consumption estimates. On top of that, nearby availability remains ample, particularly with abundant stocks sitting at destination in India, while U.S. and Brazilian carry-out levels are still far from tight.

At the same time, the macro backdrop is beginning to shift in cotton’s favour. Crude holding above $90, a softer dollar, and sharply higher freight rates are pushing up the polyester cost curve and improving the competitiveness of U.S. cotton into export channels. Add to that a sizeable speculative net short of nearly 73,000 contracts, and the market has the ingredients for a meaningful short-covering rally if sentiment starts to turn.

We are edging closer to the point where cotton can finally transition out of its bear market, although that still feels more like a 2026/27 crop-year story than an immediate one. Even so, the war with Iran is increasingly difficult to ignore, and in our view it is only a matter of time before it feeds into flat price.

U.S. cotton exports over the past two weeks have been the strongest of this marketing year, with shipments in the first week of March hitting their highest level since last May. Despite that, based on the available data we forecast that U.S. exports for this marketing year will be 11.2 million bales which ia an improvement of 0.3 million bales since our last report. If the current trend continues, it is possible that exports could exceed USDA's estimate, though this remains unlikely. Although polyester has begun to lose its competitiveness versus cotton which is now at the lowest level in five years, it will take a sustained period of high prices and mills' willingness to change blend ratios before we see a meaningful uptick in exports, which would likely not come during this marketing year. That said, mills could front-load purchases in anticipation of that shift.

Coffee prices have tried to find some stability after the steep sell-off in February. Spreads in the May-September period have found support as the Brazil differentials remain stubbornly high and CAM diffs start to firm in sympathy. Roasters in the USA keep buying hand to mouth and margins for physical traders remain firm. With NCA this week there was much talk of nearby spreads going higher whilst the certified stocks remain a potential target to stoppers.

Indonesian exports: Slowing down in a typical seasonal fashion, exports are at a 5 year record.

Honduras exports: Exports are very strong this marketing year, a good majority of recent exports have been delivered against March.