(Bloomberg) — Money managers have turned net-bullish on cotton as surging oil prices tied to the war in Iran boost the appeal of natural fiber over increasingly expensive synthetics.
Long positions on New York cotton outnumbered short ones by 16,825 contracts in the week ended April 14, according to data published Friday by the US Commodity Futures Trading Commission. That reverses a sustained net-short position since April 2024.
The US-Israeli war on Iran has lifted energy prices and, with them, the cost of oil-based synthetic fibers like polyester and nylon. That shift is improving cotton’s competitiveness, according to Bin Hui Ong, a commodities analyst at BMI, a unit of Fitch Solutions, with most-active futures climbing for the past six weeks. Asian mills in particular depend heavily on the Gulf region for feedstock used in chemical fibers, and the rising costs may push textile manufacturers to adjust blends to incorporate more cotton.
Supply risks are also adding to the rally, with rising fertilizer costs driven by the conflict threatening to curb planting and cut output in the next crop cycle. The global cotton market is projected to swing into a deficit of about 295,000 tons in the 2026-27 season, analysis firm Cotlook forecast in March, and ongoing drought in the US cotton belt has stoked uncertainty over the country’s production.
Cotton futures have climbed about 22% since the start of the war and are trading near two-year highs. That rally may have legs even if crude prices slide, Ong said.
Still, prices eased on Monday after climbing for three straight sessions. Rains in part of the US cotton belt can be seen as a source of limited relief while drought concerns remain, said Raphael Bulascoschi, a market intelligence analyst at StoneX.
The new net-long position, which was the most bullish in about two years, comes after long-only positions rose to 56,736 lots and short positions fell to a 23-month low, according to the CFTC data.
Prices:
- Cotton retreated 0.9% to 79.10 cents per pound as of 10:35 a.m. in New York
- Cocoa and arabica coffee gained in New York
–With assistance from Agnieszka de Sousa and Dayanne Sousa.
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