Cotton Futures COT Report: Week Ending 2026-02-06

Executive summary

This week's report reveals a significant increase in bearish sentiment among speculative traders, with Managed Money extending their net short position to the largest level in the provided six-week history. This shift was driven by a substantial build in new short positions. In tandem, total open interest surged by 17,396 contracts, indicating a strong influx of new capital and conviction behind these moves. Commercials also increased their net short hedging, albeit more modestly. Swap Dealers absorbed much of the speculative selling, significantly increasing their net long position. The market is now characterized by a stark divergence between deeply pessimistic speculators and long-positioned Swap Dealers, setting the stage for potential volatility.

Positioning (net, extremes vs recent weeks)

• Managed Money (Funds): Net position is now a formidable -72,336 contracts (44,468 long vs. 116,804 short). This is the largest net short position seen in the provided six-week data set, surpassing last week's -64,982 contracts and representing a significant increase in bearishness.
• Producer/Merchant (Commercials): Net position stands at a slight -2,694 contracts (114,127 long vs. 116,821 short). While this is a larger net short than last week's nearly flat position (-259 contracts), it remains well below the mid-January extreme of -13,247 contracts.
• Swap Dealers: This category holds a large and growing net long position of +45,092 contracts (57,189 long vs. 12,097 short). This is their largest net long exposure in the six weeks of data provided, indicating they are the primary counterparty to the speculative shorts.

Flows and week-over-week changes

The market saw a significant expansion in participation this week, with open interest climbing by 17,396 contracts. - Managed Money: The week's activity was overwhelmingly bearish. Funds added 7,701 new short contracts while adding only a trivial 347 longs. This resulted in their net position falling by 7,354 contracts. - Producer/Merchant: Commercials were active on both sides of the market, adding 8,018 long contracts and 10,453 short contracts. This suggests a broad increase in hedging activity from both producers (selling forward) and consumers (locking in prices). - Swap Dealers: Showed a clear bullish tilt in their flows, adding 3,141 long contracts while simultaneously cutting 3,044 short positions, leading to a net positive change of 6,185 contracts.

Commercials vs speculators

• A classic positioning divergence is in effect. Speculators, led by Managed Money, are heavily positioned for lower prices with a net short of -72,336 contracts.
• Commercials, who represent the physical cotton industry, hold a nearly balanced book. Their modest net short position of -2,694 contracts suggests that producer hedging is only slightly outweighing consumer (mill) buying. This is a less extreme net short than is often typical for this group.
• Swap Dealers are absorbing the speculative selling pressure, holding a large net long of +45,092 contracts, effectively providing liquidity to the market.

Open interest and participation

• Open Interest: Total open interest surged to 380,025 contracts, the highest level in the six-week period. The fact that this large increase coincided with a major build in speculative shorts indicates that new bearish positions are being established, rather than just longs being liquidated.
• Trader Counts: The total number of reportable traders increased to 386, reflecting the heightened market activity. Notably, the number of short-side Managed Money traders is 110, far outnumbering the 41 on the long side.
• Concentration: The market shows a slight concentration on the short side. The largest 4 traders hold 11.0% of the net short position, while the largest 8 hold 16.0%. This is compared to 7.5% and 13.0% for the largest 4 and 8 long traders, respectively.

Price context

• Price series data was not provided for this reporting period. Therefore, a direct correlation of these positioning changes with recent price action cannot be made. The analysis is based solely on the positioning data.

Risks and watchpoints

• Crowded Speculative Short: The Managed Money net short position is now at a multi-week extreme. While this reflects strong bearish momentum, such a crowded trade is vulnerable to a sharp reversal (a "short squeeze") on any unexpected bullish news.
• Surging Open Interest: The high-conviction increase in open interest alongside new short-selling reinforces the current bearish trend. A continuation of this flow could lead to further downside.
• Commercial Neutrality: The relatively balanced book of Commercials is a key point to watch. If they begin to significantly increase their net short hedging, it would signal their belief that current prices are attractive for selling. Conversely, a shift toward a net long position would be a strong bullish signal from the physical market.
• Swap Dealer Capacity: Swap Dealers are carrying a significant long position. Their willingness and capacity to continue absorbing speculative selling is a key variable for market stability. Any signs they are reducing this exposure could remove a major source of support.