Cotton’s Reality Check: Bearish Expectations from Last Season Meet a Firmer 2026–27 Opening
Indian cotton prices are strengthening despite rising arrivals, while global supply-demand estimates, physical market premiums and policy decisions shape the outlook for the new season.
India’s cotton market has entered the 2026–27 season with renewed price strength, highlighting the gap that can emerge between market sentiment and physical availability. The previous season began with bearish expectations driven by cheaper imports, weak ICE futures, a large domestic crop and expectations of substantial closing stocks. However, subsequent market developments challenged that outlook.
2025–26: When Market Expectations Met Physical Demand
At the beginning of the 2025–26 season, market sentiment was largely bearish. Cheap imported cotton, weak ICE futures, expectations of a large domestic crop and heavy Cotton Corporation of India (CCI) procurement contributed to forecasts of substantial carryover stocks. At one stage, market discussions centred on closing stocks of nearly 125 lakh bales.
However, cotton procurement and sales developed alongside changing private-market availability. CCI eventually procured more than 1 crore bales. By June 28, procurement stood at approximately 105 lakh bales, of which 79.34 lakh bales had already been sold.
Meanwhile, larger mills, trading houses and corporates accumulated cotton as some smaller market participants remained cautious amid the bearish outlook. Private-market availability gradually tightened, contributing to a late-season shift in market dynamics.
The anticipated carryover of 125 lakh bales did not materialise in the manner initially feared. Closing-stock estimates remain divergent: the Cotton Association of India (CAI) has maintained a considerably higher estimate, while the latest Shykam working balance places 2025–26 closing stocks at around 68 lakh bales.
Although the exact closing-stock figure remains contested, the season highlighted the importance of cotton consumption and physical availability alongside market sentiment.
2026–27: Indian Cotton Prices Gain Momentum
The opening weeks of the new season have brought another notable price movement in the Indian cotton market.
During the week ended October 9, ICE December cotton futures gained 166 points to 80.54 cents per pound. Domestic prices moved more sharply, with Indian 29 mm cotton rising by approximately ₹2,000–2,500 per candy to ₹66,000–66,500. The reported all-India average kapas price reached around ₹8,520 per quintal.
The international physical market also continued to trade at a premium to futures. On October 8, the Cotlook A Index stood at 90.65 cents, compared with December ICE at 79.94 cents, widening the difference to 10.71 cents.
The premium indicates that physical cotton prices remain firmer than futures prices alone might suggest.
Global Supply and Demand Present a Mixed Picture
The US Department of Agriculture’s October balance places global cotton production at 117.95 million 480-pound bales, against consumption of 123.08 million bales. This implies that projected use exceeds production.
India’s current USDA figures also indicate cotton consumption above domestic production, underlining the role of existing stocks and imports in meeting demand.
However, speculative positioning presents a contrasting signal. Managed Money net length declined for six consecutive reports, falling from more than 100,000 contracts in early September to 57,118 contracts by October 6, even as prices strengthened.
The combination of firm physical prices and declining speculative net length suggests that the market’s price strength has not been accompanied by an equivalent increase in speculative positioning.
Rising Arrivals Will Test Price Strength
Indian cotton arrivals have increased from around 30,000 bales per day earlier in the season to an estimated 50,000–55,000 bales per day.
The coming weeks will test whether domestic prices can maintain their strength as more cotton reaches the market. If prices remain firm despite accelerating arrivals, it could indicate underlying tightness in the market. Conversely, a sharp decline in kapas prices under harvest pressure could weaken the current rally.
CCI activity remains another factor to watch. After reducing its offer price for two consecutive weeks, the corporation increased it by ₹300 and sold 269,400 bales, with sales almost equally divided between mills and traders.
These developments will help shape expectations around domestic availability and procurement as the season progresses.
October 31 Import Duty Deadline in Focus
The customs-duty exemption on imported cotton is currently scheduled to run until October 31. Whether the exemption expires or is extended could influence mills’ procurement decisions and the relative attractiveness of domestic and imported cotton.
Other factors, including the rupee’s movement, higher financing costs and the price relationship between cotton and polyester, are also becoming increasingly important for market participants.
Cottonguru’s View: Physical Market Signals Remain Important
The 2025–26 season demonstrated how market expectations can diverge from developments in cotton consumption, procurement and physical availability. The new season has opened with stronger domestic prices, but rising arrivals, divergent stock estimates and declining speculative net length present a mixed picture.
For 2026–27, the direction of the market will depend on how supply entering the market compares with mill consumption, farmer selling, imports and broader physical demand. The expiry or extension of the import-duty exemption on October 31 will be another important factor to monitor.