End of 2025 Cotton Market Review: A Quiet Market Hiding Structural Stress

Rising Stocks and an Unresolved Imbalance

Updated supply and demand estimates show a familiar pattern. Global production for the 2025/26 season has been revised higher, while consumption has moved slightly lower. The result is a production surplus approaching one million tonnes.

What matters is not the headline number, but the flow. Monthly global consumption is roughly 3.6 million bales, while significant volumes of unsold cotton remain with growers and exporters, particularly in Brazil and the United States. This overhang continues to cap rallies.

Higher prices do not reduce this imbalance. They reveal it.

A Quiet Futures Market With Growing Participation

Futures prices have gone nowhere, but participation has increased. Open interest rose sharply in December, adding roughly two million bales in new positions.

This signals intent, not indifference. Traders are not leaving the market. They are positioning while prices remain compressed.

Markets rarely turn when interest disappears. More often, they turn when positions build quietly under the surface.

Positioning Matters More Than Price

Speculative positioning highlights the tension. Managed Money remains heavily net short, reflecting confidence that rallies can still be sold. Average short exposure sits near the mid-60 cent range.

Large speculators continue to hold net long positions, suggesting expectations of limited downside rather than immediate upside.

The trade appears close to flat, but futures alone do not tell the full story. On-call positions and physical flows show steady buying, particularly from Brazilian producers working through remaining inventories. This activity does not lift prices, but it helps support the base.

Macro Conditions Offer Limited Support

Interest rates have fallen significantly over the past year, and consumer spending has remained resilient in parts of the apparel sector. Yet confidence across the textile supply chain remains weak.

Retail apparel prices are flat to lower, import volumes have softened, and manufacturers remain cautious with forward commitments. Slower job growth and declining consumer confidence continue to restrain risk appetite.

Lower rates alone are not enough to revive cotton demand.

Looking Toward 2026

Early 2026 offers little immediate relief. Support programs may cushion producers, but they also delay supply adjustments. Demand remains the key missing element.

Still, the longer-term picture is not entirely negative. Production cuts are being discussed in several regions, and even modest gains in global fiber demand would materially tighten balances.

The challenge is timing.

Conclusion

Late 2025 is defined by compression rather than direction. Stocks are rising, prices are stuck, and positions are growing.

Silence does not mean stability.

The most important signals are no longer on the price chart, but in positioning, flows, and the evolving balance between supply and demand. As the market moves into 2026, the key question is not where prices should be, but who will control the market when conditions finally shift.