Summary
Key Takeaways:
Geopolitics is still the main driver, and the energy premium has intensified: Middle East risk remains central for commodities, with Brent settling at $111.26/bbl and WTI at $99.93/bbl on 28 April as Hormuz disruption outweighed even the bearish headline of the UAE leaving OPEC. Traffic through the Strait of Hormuz remains severely reduced, with Reuters reporting only seven vessels crossing in a day versus the normal 125 to 140 vessel range before the war. This keeps freight, insurance, fuel, fertilizer and synthetic fibre cost risk elevated across softs.
Cotton remains supported, but the rally is more mature now: Cotton is still trading close to the 79 to 80 c/lb area, with July settling around 79.36 to 79.67 c/lb this week. Support continues to come from West Texas drought risk, high crude oil prices, polyester substitution, a weaker dollar and speculative length. However, the short-covering story is no longer fresh, with managed money now holding one of its largest net-long positions in nearly two years, which makes the market more vulnerable to profit-taking if weather or oil risk eases.
The cotton balance sheet is still not outright bullish: USDA’s April WASDE left the U.S. 2025/26 cotton balance sheet unchanged, with production at 13.92 million bales, exports at 12.0 million bales and ending stocks at 4.4 million bales. Globally, production was raised to 121.87 million bales, use to 119.14 million bales and ending stocks to 77.04 million bales, while USDA ERS notes that world stocks are projected at the highest level since 2019/20. The bull case still needs weather stress, stronger exports or sustained polyester cost inflation to stay intact.
Weather is still the main cotton swing factor, but planting is not yet a problem: U.S. cotton planting was 16% complete as of 26 April, ahead of the five-year average of 13%, while Texas was 20% planted versus a 19% average. That said, drought is still a real production risk. Drought.gov currently shows 75.9% of Texas in drought, with severe, extreme and exceptional drought still covering a large share of the state. Earlier Southern Plains monitoring also showed soil moisture across most of Texas, Oklahoma and western Kansas below the 10th percentile.
Coffee remains tight nearby, but the forward structure is turning looser: Robusta nearby fundamentals remain supportive, with ICE robusta inventories falling to a 16-month low of 3,755 lots. Freight, insurance, fertilizer and fuel costs linked to Hormuz disruption also remain supportive for coffee importers and roasters. However, the bigger forward story is increasingly bearish: StoneX projects global 2026/27 production at 182.5 million bags versus consumption of 172.5 million bags, creating a surplus of around 10 million bags, while Brazil’s 2026/27 crop is estimated at 75.3 million bags by StoneX and near 75 to 76 million bags by other major forecasters.
Inflation risk: U.S. PPI final demand rose 0.5% in March and 4.0% year on year, with final demand goods up 1.6% and energy up 8.5%. Gasoline prices alone rose 15.7% in the PPI detail. Chicago Fed President Austan Goolsbee has warned that rate cuts may need to wait until 2027 if elevated oil prices keep inflation from returning to target.
The market is still reacting to the stalled U.S.-Iran diplomatic process and restricted shipping through the Strait of Hormuz. The difference this week is that the energy shock has become more entrenched. Brent is now above $110/bbl, WTI is close to $100/bbl, and shipping activity through Hormuz remains far below normal levels. For cotton, this keeps the polyester substitution story alive through higher synthetic fibre costs. For coffee, it keeps pressure on freight, insurance, fuel, fertilizer and financing costs.
Cotton has held firm near recent highs, but the market is now more two-sided. The supportive story is clear: West Texas remains dry, crude oil is high, the dollar has been softer, and speculative money has built a much more bullish position. However, the easy short-covering phase has probably passed. With managed money already net long and export demand still uneven, cotton needs either fresh weather stress or continued strength in energy and polyester prices to justify a clean move above the recent 80 c/lb area.
The official balance sheet still argues for caution. USDA’s April numbers do not show a tight cotton market on paper. U.S. ending stocks remain at 4.4 million bales, while global ending stocks are projected just above 77 million bales. Brazil’s record production and export strength also remain a structural headwind for U.S. cotton, even if weather risk in Texas is keeping the futures market supported in the short term.
Weather is now the most important cotton variable. Planting is progressing slightly ahead of normal nationally and in Texas, so the issue is not delayed planting yet. The issue is whether dryland acreage in West Texas and the Southern Plains can establish properly if moisture does not improve. Recent rain has helped parts of Texas, but drought coverage is still high and soil moisture deficits remain a key risk for abandonment and yield potential.
Coffee remains a nearby tightness story but a forward surplus story. Low robusta exchange stocks and Hormuz-related logistics costs continue to support the front end of the market. At the same time, the market is increasingly focused on the upcoming Brazilian crop and a much looser 2026/27 balance. StoneX’s roughly 10 million bag surplus projection gives the bear case more weight, especially if Brazil and Vietnam export flows improve as the year progresses.
Inflation risk has not gone away. The latest U.S. PPI data showed that energy is still feeding directly into the producer cost base, and the Fed is now being forced to weigh slower growth against renewed price pressure. High oil prices are supporting cotton and coffee through costs, but they also risk hurting consumer demand and delaying rate cuts.
Cotton
Cotton Price Action
Cotton is no longer breaking sharply higher, but it is still holding near the top of the recent range, Cotton closed at 79.59 c/lb on 29 April, down slightly on the day but still up 13.4% over the past month and 21.5% year on year. The market remains close to its highest level since May 2024, supported by elevated crude oil prices, Middle East disruption risk, stalled U.S.-Iran talks and the polyester substitution channel. Higher crude keeps synthetic fibre production costs elevated, which continues to lend support to cotton as a natural-fibre alternative.
The rally now looks more like consolidation than fresh upside momentum. July 2026 cotton made a one-month high of 81.79 c/lb on 22 April, but by 28 April it had settled back at 79.67 c/lb. May 2026 settled at 77.34 c/lb, while December 2026 settled at 81.11 c/lb. ICE certified cotton stocks were steady at 165,681 bales on 27 April, and the Cotlook A Index was unchanged at 89.35 c/lb.
The key change this week is positioning. This is now a fund-length market, not just a short-covering market. The latest CFTC futures and options data for 21 April showed managed money holding 66,213 long contracts and 31,749 short contracts, leaving a net long of 34,464 contracts. Longs increased by 9,477 contracts on the week, while shorts were cut by 8,162 contracts, so the net long expanded by 17,639 contracts. Barchart noted this was the largest managed-money net long in nearly two years. That keeps the tone bullish, but it also means the market is more exposed to profit-taking if oil, weather or export demand fails to confirm the move.
The official balance sheet is still a restraint. USDA’s April WASDE left the U.S. 2025/26 cotton balance sheet unchanged, with production at 13.92 million bales, exports at 12.0 million bales and ending stocks at 4.4 million bales. Globally, USDA raised production to 121.87 million bales, consumption to 119.14 million bales and ending stocks to 77.04 million bales. That is not a tight balance sheet on paper, so the bull case still needs weather stress, stronger exports or continued polyester cost inflation to keep pushing prices higher.
Export demand is not yet giving the bulls much confirmation. USDA’s latest weekly data showed net Upland sales of 119,900 running bales for 2025/26, down 26% from the previous week and 55% below the prior four-week average. Export commitments were reported at 10.58 million running bales, around 2% below last year at this point and equal to 93% of USDA’s export projection, versus a five-year average pace of 101%. Brazil also remains a competitive pressure point, with March exports hitting record levels and reinforcing Brazil’s role as a major supplier into Asian demand.
Weather is still the main swing factor. Planting itself is not yet a problem: NASS showed the U.S. cotton crop 16% planted as of 26 April, ahead of the five-year average of 13%, while Texas was 20% planted versus a 19% average. The issue is moisture. Drought.gov now shows 75.9% of Texas in drought, down from last week but still very high, with 37.2% in severe drought, 19.8% in extreme drought and 1.4% in exceptional drought. That means recent rainfall has helped parts of the state, but West Texas establishment risk has not disappeared.
NASS planting intentions put 2026 U.S. all-cotton acreage at 9.64 million acres, with Texas at 5.52 million acres, or roughly 57% of the total. If Texas abandonment stayed around a manageable 25%, harvested area would be about 4.1 million acres. If drought pushed abandonment back toward the 2022 level of roughly 69%, harvested area would fall to about 1.7 million acres. That is a difference of roughly 2.4 million acres. Using a simple 650 to 750 lb/acre yield assumption, that would imply a potential production swing of around 3.3 to 3.8 million bales, enough to materially tighten the U.S. balance sheet.
So the market still has a bullish weather and energy story, but the bar for further gains is higher than it was last week. Cotton has already priced in a lot of short-covering, a lot of crude-oil support and some Texas drought premium. A clean break above the recent 80 to 82 c/lb area likely needs either worsening West Texas moisture conditions, a stronger export-sales response, or another leg higher in oil and polyester prices.
Cotton Positioning
CFTC Managed Money: Managed Money has reduced its short position as the market has rallied, covering ~20k lots over the past three weeks. The move upwards has been primarily driven by MM Longs buyings and shorts covering.
Commercials, by contrast, appear to have sold into the rally, adding roughly ~30k lots over the same period.
US Cotton Export & Sales
U.S. cotton export demand was softer this week, but shipments remained solid. For the week ending April 16, upland net sales fell to 119,900 RB, down 26% week on week and 55% below the prior four-week average. Vietnam was again the main buyer at 62,100 RB, followed by Turkey, Pakistan, India and Malaysia, while China cancelled 8,700 RB. Upland shipments were more encouraging at 296,400 RB, led by Vietnam, Pakistan, India, Bangladesh and Indonesia. Pima was the standout, with net sales reaching a marketing-year high of 36,200 RB, mainly to India, China and Vietnam, although Pima shipments slipped to 4,500 RB. Overall, the report was not bullish on new upland demand, but the shipment pace remains supportive.
We are keeping our full-year U.S. export forecast around 11.8 to 11.9 million bales for now. The latest data still leave upside risk, but the softer upland sales pace means we are still not ready to forecast materially above USDA’s 12.0 million bale number. National Cotton Council data show all-cotton sales of 160,800 480-lb bales and shipments of 309,900 bales for the week, with cumulative sales at 11.263 million bales and cumulative shipments at 7.485 million bales as of April 16. That shipment pace is still consistent with USDA’s target if it can hold near the high-200,000 to low-300,000 bale range, but sales need to re-accelerate before the case for a clear move above 12 million becomes convincing.
The broader picture remains mixed. U.S. ending stocks are still relatively heavy, and Brazil remains a major headwind, with USDA ERS forecasting Brazil’s 2025/26 exports at a record 14.5 million bales, keeping it the world’s largest exporter for a third consecutive season. Global stocks are also forecast at 77.0 million bales, the highest since 2019/20, so even constructive U.S. shipments have to be weighed against a fairly comfortable world supply backdrop.
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
Drought risk has eased slightly but remains the main upside trigger. U.S. planting is progressing well, with cotton 16% planted nationally and Texas 20% planted, slightly ahead of average. The issue is not planting pace, but whether West Texas can establish the crop if dry conditions return. Texas is still 75.9% in drought, while Oklahoma is 85.7% in drought, so abandonment risk is still live if May turns hot and dry.
Oil and freight remain supportive. Brent and WTI have stayed elevated as U.S.-Iran talks remain stalled and Hormuz traffic remains restricted. This keeps support under cotton through higher polyester feedstock costs, freight, insurance and broader commodity risk premia.
Export shipments remain constructive even though new sales softened. Latest upland net sales fell to 119,900 RB, down 26% week on week, but shipments were still solid at 296,400 RB. If shipments continue near the high-200,000 to low-300,000 RB range, USDA may still need to revisit the 12.0 million bale export forecast later in May or June.
Speculators are now long, but not necessarily done buying if weather worsens. Managed money held 66,213 long contracts versus 31,749 shorts as of 21 April, leaving a net long of roughly 34,500 contracts. That is supportive if trend momentum continues, but it makes the market more dependent on fresh weather or export confirmation
Bear Case
The short-covering phase is largely over. Managed money added length and cut shorts sharply last week, so cotton is no longer being pushed mainly by forced short-covering. If rain improves the Texas outlook or oil risk fades, the same fund length could become a liquidation risk.
The balance sheet is still not tight on paper. USDA’s April WASDE left U.S. production at 13.92 million bales, exports at 12.0 million and ending stocks at 4.4 million. Globally, ending stocks were raised to 77.04 million bales, and ERS notes that world stocks are projected at the highest level since 2019/20.
Brazil remains a structural headwind. WASDE still has Brazil production at 19.5 million bales and exports at 14.5 million, keeping Brazil a major competitive pressure point against U.S. cotton, especially into Asian demand.
Recent drought improvement could cap the weather premium. Drought.gov shows Texas drought coverage down from last week, and planting is slightly ahead of normal. If rains keep arriving across Texas and the Southeast, the market will struggle to keep pricing a large abandonment risk.
High energy costs are not purely bullish. They support cotton through polyester substitution, but they also raise freight, fertilizer and downstream textile costs. If mills in Asia respond by slowing demand, cotton could lose support from the consumption side even while oil stays high.
Base Case
Cotton remains supported, but the market is more two-sided than last week. The rally has moved beyond a simple short-covering story and now needs confirmation from West Texas weather, export shipments or sustained strength in oil and polyester pricing.
The base case is that cotton holds a weather and energy premium near the upper end of the recent range, but a clean extension above the 80 to 82 c/lb area likely needs one of three things: worsening Texas moisture, shipments strong enough to force a USDA export upgrade, or another leg higher in crude and synthetic fibre costs.
The key triggers over the next few weeks are Texas rainfall, early crop establishment, weekly export shipments, and whether managed money continues adding length or starts taking profits.
Coffee
Coffee Price Action
Coffee price action remains choppy, with the market caught between nearby tightness and a much looser forward supply outlook. July arabica rebounded on Tuesday, closing at 290.70 c/lb, up 0.76%, while July robusta settled at $3,481/tonne, up 1.55%. That followed weakness earlier in the week, when July arabica lost more than 2% on Monday and London robusta fell 1.6% as the market refocused on the incoming Brazilian harvest and the prospect of a sizeable 2026/27 global surplus.
Near-term fundamentals are still supportive, especially in robusta. ICE robusta inventories remain extremely low, having fallen to a 16-month low of 3,755 lots, while ICE arabica stocks also dropped to a two-month low of 494,508 bags this week. Brazil’s March coffee exports were also weaker, with Cecafé reporting green coffee exports down 8% year on year to 3 million bags, which helps explain why nearby supply still feels tight despite improving crop expectations.
The bearish pressure is still coming from the forward crop story. Sucafina projects Brazil’s 2026/27 crop at 75.4 million bags, up 15.5% year on year, with arabica at 49.4 million bags and robusta at 26.0 million bags. StoneX is very similar, estimating Brazil at 75.3 million bags, including 50.2 million Arabica and 25.1 million Conilon/Robusta. StoneX also sees the global surplus expanding toward 10 million bags, which is the key reason rallies are struggling to extend.
So the market is still not clearly bearish in the short term. Low exchange stocks, reduced Brazilian exports, Hormuz-related freight and insurance risk, and weather uncertainty are keeping downside limited. But the upside is also capped by the approach of a large Brazilian crop, stronger Vietnam robusta exports and expectations of a much looser 2026/27 balance. For now, coffee looks like a nearby-tightness market rather than the start of a fresh structural bull move.
ICE front month:
Spreads:
Calendar Spread Matrix Arabica and Robusta:
Physical Pricing
Brazil differentials: Robust has come off dramatically, whilst Arabica stays strong. If someone is short those Fine Cup Diffs they are certainly not having a good month…..
Certified stocks: have slide ~40k bags for Arabica and for Robusta and they have declined around ~70k bags in the last month
Coffee Positioning:
For Arabica CFTC Managed Money: Longs have gradually been building up their position in the recent rally and during the sell off and Commercials have been relatively unchanged. There is not a dramatic position in one direction.
Outlook:
Bull Case
Nearby tightness is still the main bullish argument. ICE arabica inventories fell to a two-month low of 494,508 bags, while ICE robusta inventories remain at a 16-month low of 3,755 lots. That keeps the front end vulnerable to short-covering if roasters need coverage or if origin flows disappoint.
Brazil weather risk has not disappeared. The market is already pricing a very large 2026/27 crop, so any renewed dryness in Minas Gerais or frost risk later in the Brazilian winter could quickly challenge the 75 million-plus bag consensus. Sucafina still flags drought and frost as key risks, particularly during the June to July window.
Colombia remains supportive for washed arabica. March production fell to 754,000 bags, down 29% year on year, while first-quarter production was down 33% and March exports fell 37% to 788,000 bags. If Colombia does not recover quickly, washed arabica differentials should stay firm and limit downside in KC.
Hormuz disruption remains a cost-supportive factor. Higher freight, insurance, fertilizer and fuel costs are raising costs for importers and roasters, which keeps a geopolitical risk premium in both arabica and robusta.
Bear Case
The forward supply story has become harder to ignore. Sucafina projects Brazil’s 2026/27 crop at 75.4 million bags, up 15.5% year on year, with arabica at 49.4 million and robusta at 26.0 million. StoneX is close at 75.3 million bags, while Marex is higher at 75.9 million. That creates a clear ceiling for rallies if harvest results confirm the crop tour estimates.
The global balance is shifting toward surplus. StoneX forecasts 2026 production at 182.5 million bags versus consumption of 172.5 million bags, allowing stocks to rebuild to above 48 million bags. That implies a much more comfortable forward balance than the nearby market currently suggests.
Vietnam flows are also improving. Vietnam’s January to March exports rose 14% year on year to 585,000 MT, while 2025/26 production is projected to rise to a four-year high of 1.76 MMT, or around 29.4 million bags. That supports the view that robusta tightness is a nearby issue rather than a structural shortage.
Brazilian export weakness may become less supportive once the new crop moves. March green coffee exports were down 8% year on year to 3 million bags, but that becomes a bearish rather than bullish story if harvest pressure builds and origin selling accelerates
Base Case
Coffee still looks tight nearby but structurally looser into the second half. Low certified stocks, weak Colombia production and Hormuz-related logistics costs are keeping downside limited for now. But the market is also staring at a potentially record Brazilian crop and a much larger 2026 surplus.
The base case is a choppy range rather than a clean trend. Rallies need either fresh Brazil weather damage, a further drop in certified stocks or renewed logistics escalation. Breaks lower need physical confirmation that Brazil’s harvest is as large as Sucafina, StoneX and Marex expect.
For now, arabica should still be treated as a short-term weather and logistics market, but a supply-rebuild market into the second half. Robusta remains the tighter nearby contract, but it is also the one most exposed to reversal if Brazil conilon arrivals and Vietnam exports keep improving.
