Did Cotton Run Out of Upside Steam?

I asked if cotton futures will continue to rally in an April 10, 2026, Barchart article, where I concluded with the following:

Long positions around that level require trailing stops in the current environment. As cotton prices rise, increasing profit horizons is acceptable, but stop levels should increase commensurately to protect profits and capital. I remain bullish on cotton prices, but the higher they rise, the greater the odds of a correction. 

Nearby ICE cotton futures traded at 72.82 cents per pound on April 9, 2026, and while they have risen over 6.6% by late May, the have declined from the most recent high. 

Cotton made higher highs, and the rally appears to have run out of steam

After reaching a low of 60.90 cents per pound on February 6, 2026, the continuous ICE cotton futures contract made higher lows and higher highs. 

At the most recent high of 88.88 cents per pound on May 13, cotton rallied 45.9% from the low on February 6. ICE cotton futures for July delivery have pulled back to under 78 cents per pound on May 22, as the bullish trend ran out of steam.

Seasonality and commodity cyclicality have been powerful forces

The thirty-year monthly ICE cotton futures chart shows that annual price peaks tend to occur during spring and summer. The all-time high of $2.1970 per pound in 2011 was in March, and the 2022 lower high of $1.5595 per pound was in May. Cotton tends to reach seasonal highs during the annual growing season in the northern hemisphere, as uncertainty in weather conditions and events affects annual crops. 

The chart also shows that cotton prices have formed higher lows since October 2001, when the price fell 28.20 cents per pound. In November 2008, cotton reached a higher low of 39.23 cents per pound, and in April 2020, as the global pandemic gripped markets across all asset classes, cotton futures fell to a higher low of 48.35 cents per pound. Cotton futures have remained above 60 cents since July 2020.

Cyclicality is a critical concept in commodity markets, as prices tend to decline to levels where production becomes uneconomic and declines. Inventories fall as consumption increases at lower prices, leading to bottoms and higher prices. Conversely, prices often rise to levels where production increases, inventories grow, and consumption declines due to higher prices, leading to price tops and lower prices. At 60 cents per pound in February 2026, cotton futures were at a level where commodity cyclicality supported prices. Seasonality took over in March, April, and May, driving cotton to its most recent high of 88.88 cents per pound. Cyclicality and seasonality combined to create conditions that drove cotton prices up over 45% from early February through May 2026. 

The latest WASDE report was not too bullish

On May 12, 2026, the USDA released its latest World Agricultural Supply and Demand Estimates Report.  The USDA told the cotton market:

The WASDE reported that U.S. cotton’s balance sheet for the 2026/2027 crop year shows lower production and ending stocks, increased exports, and beginning stocks compared to the previous year, with unchanged demand or consumption. Meanwhile, the global cotton balance sheet showed increased production, growing consumption, and higher beginning and ending stocks. Therefore, the WASDE was not overly bullish, but cotton has rallied on the back of commodity cyclicality and the uncertainty around weather conditions during the 2026 crop year. 

Technically, cotton could have upside potential to the $1 level

The monthly five-year cotton futures chart shows that the bearish trend ended at the April 2025 low of 60.80 cents per pound, with cotton futures forming a slightly higher low of 60.90 cents per pound in February 2026. 

The chart shows that cotton has entered a bullish trend, with the first upside technical resistance target at the February 2024 high of $1.0380 per pound. A move over that level would end the bearish trend since the May 2022 high of $1.5595 per pound. Cotton will need to hold above 71.38 cents per pound, the March 2026 high, to keep the bullish trend intact. 

Continue to use trailing stops on long positions

I have been bullish on cotton since February 17, 2026, when I wrote:

Cotton offers value at the current price level, but that does not mean prices will not fall to new lows. In April 2020, the global pandemic caused prices to reach a 48.35 low, and in late 2008, they reached 39.23 cents per pound. However, in the current inflationary environment, with production costs rising and the U.S. dollar’s value declining, I believe cotton prices will hold around 60 cents per pound. Commodity cyclicality and seasonality increase the odds of a recovery rally over the coming weeks and months.  

As expected, cotton prices have risen and are currently above 77.5 cents per pound on the ICE futures contract for July delivery. While the trend remains bullish, the prospects for even higher prices are not the same as in February, as the higher they rise, the greater the risks of downside corrections. Therefore, any long position in the cotton futures market from much lower levels requires adjustments. It is acceptable to expand profit horizons during the current bullish trend, but stop-loss levels must be raised to protect profits and capital.

Risk-reward dynamics should always reflect the current price, not the level at inception of the trade. Cotton prices have backed off from the May 13 high of 88.88 cents, but remain in a bullish trend. The higher they rise, the greater the odds of a more significant correction. Time will tell whether 88.88 cents per pound proves to be the 2026 seasonal high.