Cotton Sees the End

The cotton market is ending the month of January with little fanfare. For the month, the market is off 60 or so points. Traders are awaiting whatever market-moving news that might unfold during February.

Supposedly this morning, President Trump will nominate Kevin Warsh to head the Federal Reserve this May. Warsh has been a Fed governor, but supposedly is more of a hawk on monetary policy.

There is an intense heat wave gripping Australia. Daytime highs are more than 100 degrees Fahrenheit for much of the agricultural belt, with some extreme highs pegging 120 degrees F. Crops at risk are grains, oilseeds, cotton, and of course livestock.

Wednesday, the Federal Reserve kept interest rates unchanged at 3.5% to 3.75% during January’s meeting. That followed 3 consecutive cuts in 2025. The decision reflected a cautious stance as policymakers weigh still-elevated inflation against signs of a cooling labor market. Officials reiterated that future moves would depend on incoming inflation, employment, and broader economic data.

Today at 3:30 p.m. EST, the CFTC will issue its weekly Commitment of Traders report. Last week’s held that the managed-money funds had net sold some 1,500 positions, increasing their net short carry to 52,000 contracts. Interestingly, cotton’s open interest has swelled to a record high of 360,000 positions.

The U.S. Congress has averted a partial shutdown of the government. Certain congressional leaders came to compromising terms on the funding issues. Earlier, the Democrats were wanting to stop the funding of the DHS budget as a protest of the Minnesota situation.

March options will expire on Feb. 6, one week from Saturday. Traders will be anticipating what amount of Puts and Call may expire “in-the-money”.

The latest drought information shows the U.S. cotton planted area at 83% drought (varying stages). However, the recent winter storm, Fern, may have improved soil conditions in some areas.

Chart support for March cotton stands at 62.90 cents and 62.50 cents, with resistance hovering about 64.00 cents and 64.50 cents. Friday morning’s estimated volume is 21,108 contracts.

Keith Brown can be reached at commodityconsults@gmail.com or by calling (229) 890-7780.