Cotton No. 2 Futures Positioning - Week Ending 2026-03-13

Executive summary

This report covers positioning in Cotton No. 2 futures for the week ending March 13, 2026. The dominant theme remains the extremely large net short position held by Managed Money, which saw a notable reduction this week, primarily through short-covering. This unwinding was met by a significant reduction in the equally large net long position held by Swap Dealers. Commercials (Producer/Merchants) held a relatively stable net short hedging position. Open interest saw a marginal increase, halting a multi-week decline from its early February peak. The market structure is heavily defined by the tension between bearish speculators and bullishly positioned Swap Dealers.

Positioning (net, extremes vs recent weeks)

• Managed Money: Net short -67,950 contracts. This is a significant reduction in their bearish stance from last week's -74,199 contracts and is well off the recent peak net short of -80,705 contracts recorded on February 20. Despite the reduction, the position remains historically large and deeply bearish.
• Producer/Merchant (Commercials): Net short -31,665 contracts. This is a moderate net short stance for physical market participants and is slightly less short than the -33,200 contracts held the prior week.
• Swap Dealers: Net long +50,015 contracts. This marks a substantial decrease from their peak net long position of +57,723 contracts last week. They remain the largest net long category by a wide margin, acting as the primary counterparty to speculative shorts.

Flows and week-over-week changes

• Managed Money covered shorts and added new longs, reducing their net short position by 6,249 contracts. The move was primarily driven by the closing of 3,497 short contracts, with 2,752 new long contracts also being added. This suggests a potential ebbing of bearish conviction.
• Swap Dealers were the largest movers, cutting their net long exposure by 7,708 contracts. This was achieved by liquidating 5,176 long contracts while simultaneously adding 2,532 new shorts.
• Producer/Merchants had a quiet week, making only minor adjustments. They trimmed their net short position slightly by reducing short hedges (-1,716 contracts) more than they reduced long positions (-181 contracts).

Commercials vs speculators

The market is characterized by a stark divide. Speculators, represented by Managed Money, hold a massive net short position of -67,950 contracts. On the other side, Swap Dealers are providing the liquidity with a +50,015 contract net long position. This dynamic suggests significant activity related to OTC derivatives or structured products being hedged in the futures market by swaps.

Interestingly, the traditional commercial hedgers (Producer/Merchants) are also net short (-31,665 contracts), aligning them directionally with speculators, though for different reasons (hedging physical inventory vs. outright directional bets). The primary structural tension is therefore between Managed Money shorts and Swap Dealer longs.

Open interest and participation

• Total Open Interest increased marginally by 1,501 contracts to 329,892 contracts. This small build is notable as it halts a steep four-week decline from the peak of 380,025 contracts seen on February 6.
• Managed Money shorts remain a dominant force, accounting for 34.3% of total open interest. Swap Dealer longs represent 19.4% of OI.
• Concentration among the largest traders is moderate. The top 4 net short traders control 13.0% of the open interest, while the top 8 control 18.9%. This indicates the bearish speculative view is widespread rather than confined to a few oversized players.

Price context

Price series data was not provided for the reporting period. Therefore, a direct correlation between positioning changes and price action cannot be established in this report. The short-covering from Managed Money could suggest that prices found a level of support during the week, but this cannot be confirmed.

Risks and watchpoints

• Short Squeeze Risk: The primary risk remains the crowded Managed Money net short position. At -67,950 contracts, it represents significant fuel for a potential short-covering rally. The short-covering observed this week could be the beginning of a larger unwind if a bullish catalyst emerges.
• Swap Dealer Unwind: The significant reduction in the Swap Dealers' net long position is a key development. If they continue to liquidate their longs, it could add considerable selling pressure to the market, especially if not met by continued speculative short-covering. Their flows will be critical to monitor in the coming weeks.
• Commercial Hedging: The Producer/Merchant position is a barometer of physical market sentiment. A shift towards significantly reducing their short hedges could signal a belief that prices are undervalued or that physical demand is improving, which would be a supportive factor.