Could the Next Bull Run be Cotton?
- Samuel Morton
- 7 days ago
- 3 min read
If you haven't noticed, Cotton has almost recovered from its 2020-2022 upside. The price is currently steadily declining below its 30-year mean range of 85-90 cents. Apart from cotton prices being below average, are there any reasons to expect cotton to become bullish in the near future? First, let's look at the reasons why cotton prices have historically risen.
What causes cotton prices to increase?
'Supply and demand' is obviously what drives market prices. Cotton is no different. But what things may cause a surge or dump in cotton supply or demand? I've listed these below.
Climate & Weather Conditions
Bad growing conditions, such as droughts, floods, and extreme weather, in cotton-growing regions can significantly reduce yields and threaten supply. A cotton farmer producing less cotton than expected tightens supply, driving up cotton prices.
Production Costs
Severe growing conditions may not just reduce yield, they can also increase the production costs. A rise in energy prices, fertiliser costs, wages, and pesticide prices will increase cotton production costs. To maintain healthy profit margins, higher production costs mean higher sale prices.
Textiles and Fashion
An increase in cotton demand due to current clothing and textile trends may push prices higher. Cotton is mostly used for clothing, home furnishings, and fabrics.
Logistics and Geopolitical Tensions
Distribution costs, such as shipping costs, can increase cotton prices. Tariffs and trade wars also increase prices.
Currency
Cotton is priced in US dollars. Currency fluctuations can affect commodity markets, including cotton markets.
What has caused swings in historical cotton prices?
Over the last decade, there have been three significant rallies in cotton: the 2017-2018 rally, the 2020-2022 rally, and the 2024 rally.
2017-2018 Cotton Rally
This was driven by a few factors, but the main driver was trade tensions between the US and China, including concerns about tariffs on cotton exports. China is the world's largest producer of cotton.
2020-2022 Cotton Rally
A combination of factors led to a strong bullish run in cotton between 2020 and 2022:
2020: This was the COVID rebound after a sell-off in early 2020 due to COVID fears.
2020-2021: During these years, demand for cotton grew due to post-COVID clothing demands and inflation. These years also saw supply issues due to weather and production challenges.
2022: This was the invasion of Ukraine, which increased energy prices. There were also supply chain disruptions at ports.
2024 Cotton Rally
The short-lived cotton rally in 2024 was driven by various factors, including crop and planting uncertainties and higher demand.
When will cotton become bullish again?
The Fundamentals
It's the fundamentals that drive cotton prices. Not technicals.
Recent cotton rallies were driven by supply constraints, trade wars, rising demand, and poor growing conditions. All of which are hard to predict. But you don't have to predict these things; you just need to be aware of them when they happen.
So, to answer the question, 'when will cotton become bullish', it will likely be when Trump decides to start a trade war with China again, or China or India have adverse weather conditions, or when there are next supply chain issues, such as shipping delays or a rise in shipping costs. Pay attention to global news. Anything that disrupts the planting, growing, export, or shipping of cotton will increase its price.
The Technicals
As of January 2026, cotton prices are steadily declining and below average.
Price action on the daily time-frame has formed a descending triangle. A break below the support could signal that cotton prices will move lower. A break above the pattern may indicate some upside.
How to Trade or Invest in Cotton?
To trade cotton short-term, I suggest trading Cotton Cash CFDs or Cotton Futures. You can trade Cotton Futures as a CFD with IC Markets.
To invest in cotton long-term, I suggest buying WisdomTree Cotton (COTN).
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