The Bearish Outlook for Cotton in 2026 Amid Weak Export Demand and Global Supply Abundance

The global cotton market is entering a critical juncture in 2026, marked by a confluence of weak export demand, surging global supply, and bearish technical indicators. These factors collectively paint a compelling case for caution-or even short positions-in cotton futures, as the industry grapples with structural imbalances that threaten to depress prices for the foreseeable future.

Fundamental Weakness: Underperforming Exports and Oversupply

Global cotton export sales in 2025 have already signaled troubling trends. According to the USDA's December 2025 Economic Letter, global production for the 2025/26 season was revised downward to 119.8 million bales, while exports were trimmed to 43.7 million bales, reflecting reduced shipments from key players like Mali and Bangladesh. The U.S., despite projecting a modest export increase, faces rising ending stocks of 5.2 million bales, underscoring a lack of demand absorption. Meanwhile, Brazil's dominance in global exports-projected to ship 13.9 million bales-has intensified price competition, further squeezing margins for producers.

China, the world's largest cotton consumer, remains a critical drag on demand. Imports are expected to remain capped at 5.2 million bales in 2026 due to weak domestic consumption and a strategic shift toward synthetic fibers. This trend is compounded by India's record cotton procurement and temporary import duty suspensions, which have added short-term supply to the global market without stimulating demand. Analysts warn that these dynamics are creating a "perfect storm" of oversupply, with global ending stocks projected to reach 78.86 million bales by 2025/26-a level that historically correlates with prolonged bearish pressure.

Technical Analysis: Key Levels and Bearish Momentum

Technical indicators reinforce the fundamental case for a bearish outlook. Cotton futures (CT1!) have been range-bound between 63.50 and 65.50 cents per pound in recent months, with key support levels at 65.73 and 60.80 cents per pound.

A breakdown below 66 cents-a critical psychological threshold-could trigger a cascade to 64 cents in the short term, with 60 cents per pound emerging as a long-term target. Resistance levels at 67.29–67.44 and 68.17–68.40 cents per pound have repeatedly failed to hold, suggesting a lack of buyer conviction.

The bearish bias is further validated by the MACD crossover on the COTTH6 contract (May 2026), which has signaled downward momentum as prices consolidate within a 60–70 cents per pound range. Analysts project prices could fall to 57 cents per pound by mid-2026 if demand fails to rebound or production disruptions remain absent. For context, the corn-to-cotton price ratio-a proxy for U.S. acreage decisions-currently stands at 6.5, hinting at a potential 10–10.5 million acres of cotton planted in 2026, which could exacerbate supply-side pressures.

Market Sentiment: A Consensus of Caution

Investor positioning and sentiment metrics align with the bearish narrative. The Commitment of Traders (COT) report and Open Interest Heatmap suggest a growing concentration of short positions, particularly in the March and May 2026 delivery contracts. While direct put/call ratio data for 2026 futures is sparse, the broader market's sensitivity to U.S.-China trade tensions and synthetic fiber substitution trends points to heightened volatility.

The forward curve for 2026 deliveries-trading at 68.36 and 69.63 cents per pound for March and May contracts, respectively-offers a potential entry point for longs if prices approach the 60-cents level. However, this scenario hinges on a sharp, unanticipated shift in demand or production shocks, which appear unlikely given current trends.

Conclusion: A Case for Caution

The convergence of weak export demand, global oversupply, and bearish technical indicators creates a compelling case for caution in cotton futures. Producers and investors should prioritize risk management strategies, including hedging against further price declines and monitoring key support levels like 60.80 cents per pound. For traders, short positions in the CT1! and COTTH6 contracts-particularly if prices break below 66 cents-could offer attractive risk-reward profiles. As the market navigates this challenging landscape, the path of least resistance for cotton prices appears decisively downward.