GSX Weekly Commodity Comment

Key Takeaways:

The market is no longer reacting to a brand-new energy shock. It is now trading the durability of that shock. The Strait of Hormuz remains the centre of the commodity risk premium, but the tone has changed. Oil prices have pulled back from the most extreme levels, yet shipping remains heavily constrained and the commercial market still lacks clarity on safe transit. Reuters reported that, as of May 4, traffic through the Strait had not materially recovered, with only one tanker and a few other vessels passing into the Gulf of Oman and no broad queue of commercial ships lining up to move.

For cotton and coffee, that means the cost story has not disappeared. Freight, insurance, fuel, fertilizer and financing costs remain vulnerable as long as Hormuz is effectively impaired. The difference this week is that the market is starting to separate headline risk from confirmed physical disruption. Oil is still high enough to support substitution and cost inflation, but the move is now more two-sided as traders react to diplomacy, military operations and inventory data in real time.

Cotton has moved from consolidation back into an upside extension. July 2026 cotton closed at 84.80 c/lb on 5 May, up 188 points on the day, while May 2026 settled at 82.46 c/lb and December 2026 at 85.27 c/lb. July also made a fresh one-month and 52-week high at 84.90 c/lb, leaving the contract up about 16.1% over the past month and 16.8% year on year. The key change from last week is that the market has now cleared the previous 80 to 82 c/lb resistance area, so that zone now becomes first support rather than overhead resistance.

The rally is no longer just driven by the War in Iran. Crude oil was sharply lower on Tuesday, down $3.74 to $102.68, yet cotton still rallied strongly. That suggests the move is being supported by a mix of technical buying, fund length, weather risk and still-elevated synthetic-fibre cost pressure, rather than by crude alone. ICE certified cotton stocks rose to 180,192 bales on 4 May, while the Cotlook A Index increased to 92.05 c/lb and the Adjusted World Price was 65.66 c/lb.

Spot market indicators have also firmed. USDA’s Weekly Cotton Market Review showed spot quotations for the seven designated U.S. cotton markets averaging 75.29 c/lb for the week ending 30 April, up from 75.05 c/lb the prior week and 63.94 c/lb a year earlier. The July ICE settlement price ended that week at 82.20 c/lb, compared with 79.45 c/lb the previous week.

The market therefore looks stronger technically than it did last week, but also more vulnerable to profit-taking. The first upside area is now roughly 85.50 to 87.50 c/lb, while downside support sits around the old breakout zone near 82 to 83.50 c/lb. A failure back below that area would suggest the breakout has lost momentum; holding above it would keep the bull structure intact.

The overall setup is therefore more conditional than last week. The risk premium is still real, and weather remains capable of pushing cotton higher. Coffee still has enough nearby tightness to resist a straight-line selloff. But both markets are now being asked to justify elevated prices against balance sheets that are not uniformly bullish. The next move will likely depend less on the existence of risk and more on whether that risk worsens, fades, or simply becomes part of the baseline.

The key positioning message is unchanged: this is now a fund-length market, not simply a short-covering market. The latest CFTC futures and options data for 28 April showed managed money holding 66,880 long contracts and 28,525 short contracts, leaving a net long of 38,355 contracts. Net length increased by 3,891 contracts on the week, with longs up 667 contracts and shorts cut by 3,224 contracts.is still supportive, but the character of the move has changed.

Last week’s rally was driven by a large expansion in fund length; this week’s CFTC data show a smaller increase, led more by short covering than by aggressive new long buying. That keeps the tone bullish, but it also means the market is increasingly dependent on confirmation from weather, export demand or energy markets. If those supports fade, the larger managed-money long makes cotton more exposed to long liquidation.

Commercial positioning remains a caution point, but the latest weekly change is less aggressively bearish than the prior three-week pattern. In the CFTC futures and options report, producer, merchant, processor and user accounts were 71,367 contracts long and 199,500 contracts short, leaving them heavily net short. However, their net short increased by only about 827 contracts on the week, as both longs and shorts were reduced. In other words, commercial hedging pressure remains present, but the latest data do not show the same kind of fresh commercial selling acceleration seen during the earlier phase of the rally.

The official balance sheet is still the main restraint on the bull case. USDA’s next WASDE is scheduled for 12 May, so the April WASDE remains the latest official balance sheet. USDA left the U.S. 2025/26 cotton crop near 13.9 million bales, with exports at 12.0 million bales, ending stocks at 4.4 million bales and a stocks-to-use ratio near 32%. Globally, USDA put production at 121.9 million bales, consumption at 119.1 million bales and ending stocks at 77.0 million bales.

Brazil remains a major competitive pressure point. USDA estimates Brazil’s 2025/26 cotton production at a record 19.5 million bales, while exports are forecast at a record 14.5 million bales, keeping Brazil as the world’s largest cotton exporter for a third consecutive year.

Planting progress is not yet a problem. NASS crop progress data showed the U.S. cotton crop 21% planted as of 3 May, two points ahead of the five-year average. Texas was also running slightly ahead of average, while Georgia was behind as the world’s largest cotton exporter for a third consecutive year.

NASS planting intentions still put 2026 U.S. all-cotton acreage near 9.6 million acres, while Texas is estimated at 5.52 million acres, or roughly 57% of the U.S. total. If Texas abandonment stayed near a manageable 25%, harvested area would be about 4.1 million acres. If drought pushed abandonment back toward the 2022-type level of roughly 69%, harvested area would fall to around 1.7 million acres. That is a difference of about 2.4 million acres. Using a simple 650 to 750 lb/acre yield assumption, the potential production swing is still roughly 3.3 to 3.8 million bales, enough to materially tighten the U.S. balance sheet.

As of April 30, 2026, Cotlook published basis levels remain positive versus ICE, but the tone is softer month-on-month. Franc Zone is still carrying the strongest premium at +11.55 c/lb, followed by Texas SM at +10.30 c/lb,

the A Index at +9.85 c/lb, and Brazilian Middling at +7.80 c/lb. Week-on-week moves were limited, but the monthly change shows basis erosion across the main origins, led by Texas -2.01 c/lb MoM and Brazil -1.76 c/lb MoM.

Overall, physical cotton is still priced at a clear premium to futures, but that premium has narrowed, suggesting less relative tightness in origin offers compared with a month ago.

US cotton export demand remains constructive, and this week’s report was more supportive than the prior week. For the week ending April 23, upland net sales rebounded to 162,900 RB, up 36% week on week, though still 33% below the prior 4-week average. Shipments were the stronger feature, rising to 384,600 RB, up 30% week on week and 18% above the prior 4-week average. Vietnam again led shipments and buying interest, with current-year upland sales led by Vietnam, Pakistan, Honduras, Bangladesh, and India. New-crop upland sales were also notable at 105,700 RB, led by Turkey, China, Guatemala, Honduras, and Pakistan. Pima cooled from the prior week’s spike but still held above trend, with net sales at 21,900 RB and exports at a strong 17,800 RB.

We are keeping our full-year U.S. export forecast at around 11.61 million bales for now. The latest shipment pace keeps upside risk alive, and another few weeks near this level would make USDA’s 12.0 million bale export target more credible. That said, upland sales are still running below the 4-week average, so we are not yet ready to forecast a number above 12 million unless the sales pace improves more consistently. USDA’s April balance sheet remains the latest official update, with no U.S. cotton supply or demand changes, 2025/26 exports at 12.0 million bales, ending stocks at 4.4 million bales, and the season-average farm price raised to 61 cents/lb. The May 12 update is now the next likely checkpoint if shipments continue to run firm.

The broader picture is still mixed at best. U.S. ending stocks remain relatively heavy at 4.4 million bales, with a stocks-to-use ratio near 32%. Brazil also remains a major competitive headwind, with USDA forecasting 2025/26 exports at a record 14.5 million bales, leaving Brazil as the world’s largest cotton exporter for a third consecutive year. USDA’s 2026 planting outlook still points to a modest rebound in U.S. cotton area, with intended plantings near 9.6 million acres, up about 4% from 2025, although still low by recent historical standards.

Weather risk has not disappeared, even with some improvement in the broader drought picture. U.S. cotton planting reached 21% complete as of May 3, slightly ahead of last year and the 5-year average, with Texas at 24% and Oklahoma only 1% planted. Statewide drought coverage has eased to roughly 75% of Texas and 80.6% of Oklahoma, but USDA’s crop-area drought data still show 98% of U.S. cotton production area and 94% of Texas cotton area in drought, with about half of U.S. cotton area in extreme or exceptional drought. NOAA’s outlook offers some near-term rainfall chances for Texas and the Southern Plains, but week-2 hazards also flag extreme heat risk across northwestern Texas into Oklahoma and high-wind risk across portions of the Central and Southern Plains.

Near-term fundamentals still look tight, particularly in robusta, although the market is starting to look through that tightness. ICE robusta certified stocks remain near a 16-month low after falling to 3,755 lots, and StoneX reported another 21-lot net draw in certified robusta stocks on 5 May. Brazil’s robusta/canéphora harvest is already underway, so new-crop supply should increasingly reach the pipeline, but it has not yet fully loosened the front end.

Arabica is still being pulled in opposite directions. On the supportive side, recent below-normal rainfall in Minas Gerais remains a risk marker, with Somar reporting just 4.2mm in one recent week, only 20% of the historical average. Colombia also remains a nearby washed-arabica concern: March production fell 29% year on year to 754,000 bags, while first-quarter output was down roughly 33.5%. ICE arabica stocks have also tightened again from the March build, falling to 497,508 bags on the 5th of May.

On the bearish side, the medium-term supply outlook has strengthened further. Brazil’s 2026/27 crop is still expected to be large: Reuters reported a CTA farmer survey projecting a record 71.4 million bags, up 11.5%, including 47.9 million bags of arabica and 23.5 million bags of robusta. That is below the more aggressive private forecasts, with Sucafina at 75.4 million bags, StoneX at 75.3 million and Marex at 75.9 million. StoneX also continues to frame 2026 around a much looser global balance, with a potential surplus of around 10 million bags.

Robusta has an added bearish offset from Vietnam. Vietnam’s General Statistics Office data showed Jan-Apr coffee exports up 15.8% year on year to 810,000 tonnes, or about 13.5 million bags, which is starting to challenge the tight robusta-stock story even if certified inventories remain low.

Net-net, the front end can stay supported by low certified stocks, slower nearby availability and Colombian washed-arabica tightness, but rallies look increasingly vulnerable as Brazil’s harvest advances and Vietnam export flow improves. The market is no longer trading a pure low inventory story at destination. It is now trading nearby tightness against a much more comfortable second-half 2026 supply outlook.

ICE front month:

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Calendar Spread Matrix Arabica and Robusta: