Cotton (ICE) Futures - COT Report for Week Ending 2026-02-20

Executive summary

This week's report reveals a market defined by extreme speculative bearishness and a significant liquidation event. Managed Money extended its net short position to the largest level seen in recent history, primarily by adding new short positions. This occurred alongside a substantial drop in overall open interest, suggesting a combination of fresh bearish bets and widespread position closing. Commercials (Producers/Merchants) also reduced their gross exposure significantly, moving to a nearly flat net position. In contrast, Swap Dealers absorbed speculative selling pressure, increasing their already large net long position. The lack of accompanying price data makes it difficult to assess market reaction, but the stretched speculative positioning points to a heightened risk of a short-covering rally should a bullish catalyst emerge.

Positioning (net, extremes vs recent weeks)

• Managed Money: The net position deepened to -80,705 contracts (42,337 long vs. 123,042 short). This is the largest net short position for this group in the provided data set, extending a multi-week trend of increasing bearishness from -49,727 contracts in mid-January.
• Producer/Merchant (Commercials): This group is nearly flat, holding a small net short of -3,243 contracts (82,575 long vs. 85,818 short). This is a stark change from their more significant net short of -13,247 contracts in mid-January and reflects a major reduction in gross positioning this week.
• Swap Dealers: Their net long position grew to +57,632 contracts (66,431 long vs. 8,799 short). This is the largest net long position for Swaps in the provided data, positioning them as the primary counterparty to the speculative shorts.

Flows and week-over-week changes

The reporting week was characterized by a large-scale reduction in market participation, accompanied by a targeted increase in bearish bets. - Managed Money: This group drove the bearish narrative, adding +4,431 short contracts while making only minor additions to longs (+239). This resulted in their net position becoming more bearish by 4,192 contracts. - Producer/Merchant: Commercials engaged in massive liquidation. They cut -16,690 long contracts and simultaneously cut -15,667 short contracts, signaling a significant withdrawal from the market or the rolling of physical positions. Their net position became slightly more short by 1,023 contracts. - Swap Dealers: Swaps were the key buyers this week, adding +5,470 long contracts while adding a negligible +125 shorts. - Overall Market: Total Open Interest saw a sharp decline of -21,943 contracts, a significant liquidation event.

Commercials vs speculators

The classic dynamic of Commercials hedging against Speculators is currently overshadowed by a direct confrontation between speculators and Swap Dealers. - Speculators (Managed Money) are positioned with overwhelming bearish conviction. Their gross short position (123,042 contracts) is nearly three times the size of their gross long position (42,337 contracts). The number of short-side participants (113) also far exceeds the long-side participants (41). - Commercials (Producer/Merchant) appear to be on the sidelines. Their nearly balanced net position and the large-scale liquidation of both long and short hedges suggest a lack of strong conviction at current price levels or that hedging programs have been completed for the time being. - Swap Dealers are providing the primary counterbalance to speculative selling, holding a substantial net long of +57,632 contracts. They are effectively facilitating the large speculative short interest.

Open interest and participation

• Open Interest (OI): Total OI fell sharply to 338,635 contracts, down from a recent peak of 380,025 just two weeks prior (as of Feb 6). Such a significant drop in OI alongside an increase in net short positioning suggests that while some fresh shorts were initiated, a larger number of both long and short participants closed their positions and exited the market.
• Concentration: The market shows moderate concentration on the short side. The largest 4 traders hold 10.3% of the net short position, and the largest 8 traders hold 15.9%. This indicates that while the bearish view is widespread, a significant portion is held by larger players.

Price context

Price series data was not provided for this reporting period. Therefore, a direct correlation between the significant liquidation, increased speculative shorting, and the market's price action cannot be established. The analysis is based exclusively on the provided positioning data.

Risks and watchpoints

• Short-Squeeze Potential: The Managed Money net short position of -80,705 contracts is at a historical extreme for the observed period. This crowded trade is highly vulnerable to a rapid and volatile short-squeeze rally on any unexpected bullish news or a shift in market sentiment.
• Continued Liquidation: The sharp drop in open interest is a key watchpoint. If liquidation continues, it can exacerbate volatility as participants rush to exit positions. The behavior of commercials is critical; a return to buying/hedging could provide market support, while further selling could add to downside pressure.
• Swap Dealer Capacity: Swap Dealers are absorbing a tremendous amount of speculative short interest. Their capacity or willingness to continue adding to their record net long position is a crucial variable. Any sign of them unwinding these longs would remove a major source of support from the market.