Latest / The Commodities Economy with Fexingo: Oil, Gold, Wheat, and Raw Material Markets / Why Cotton Is Surging Past 77 Cents While Corn Stalls
Transcript
- Lucas: Cotton has been the hottest trade in agriculture over the past week — up 8 percent in five sessions to just over 77 cents a pound. That puts it ahead of every other major crop we track. Luna: And corn is up nearly 6 percent in the same window, which is nothing to sneeze at. But the gap between cotton's rally and corn's relative stall is worth unpacking. Lucas: Exactly. Corn at 437 cents actually looks strong in isolation. But when you compare it to cotton's trajectory, or even wheat which is up only 2.2 percent, you start to see a real divergence within the ag complex. Luna: So what's driving cotton specifically? Because the broader commodity environment isn't exactly booming — crude is wobbling around 69, gold slipped 1.9 percent this week. Lucas: Right, it's a cotton-specific story. The big catalyst was the USDA's weekly export sales report released last Thursday. It showed net sales of upland cotton for the 2025-2026 marketing year at more than 350,000 running bales — that's nearly double the prior week and well above the trade estimates. Luna: And that report came on the heels of a lower production forecast from the USDA's June acreage update, which trimmed planted acreage by about 2 percent from the March intentions. Lucas: That's the double punch. Fewer acres planted, and then stronger than expected demand from foreign buyers — particularly China and Vietnam. The market repriced pretty quickly. Luna: So cotton is getting a demand and supply squeeze simultaneously. Corn, on the other hand, has had a more neutral news flow. The crop progress report this week showed 68 percent of the corn crop in good-to-excellent condition — that's slightly above the five-year average. Lucas: Right, so no supply scare there. And on the demand side, corn export sales have been solid but not spectacular. Plus, ethanol margins have been under some pressure with gasoline prices easing. So corn's rally looks more like a technical rebound after a weak May than a fundamental breakout. Luna: And you've also got the weather factor. Parts of the Midwest have seen adequate moisture for corn, while the Delta and Southeast — key cotton regions — have been dry enough to raise some concern about yields. Lucas: That's a good point. The drought monitor shows moderate dryness expanding across Arkansas, Louisiana, and Mississippi. Those are big cotton-producing states. Corn's heartland in Iowa and Illinois has been in better shape. Luna: So the divergence makes sense: cotton's got a real supply-demand story; corn's got a 'not bad, but not great' story. But can cotton sustain this rally? 77 cents is a level we haven't seen since early 2023. Lucas: That's the million-dollar question. The next USDA supply-demand report comes out July 11, and that will give us updated ending-stocks estimates. If the market sees another cut to U.S. ending stocks, cotton could push toward 80 cents. Luna: But there's a risk here too. If export sales slow down — and they often do after a big burst — or if the weather pattern shifts to bring rain to the Delta, the rally could stall just as quickly. Lucas: Absolutely. Commodity rallies driven by a single report are often fragile. The speculator positioning data shows that managed money has added to net long cotton futures in the latest week, which suggests momentum, but also leaves room for a sharp unwind if the narrative changes. Luna: And meanwhile, corn might actually have more upside potential if the weather turns hot in July. The market is pricing in a fairly comfortable supply scenario. Any disruption to that — a heat wave during pollination — could shift corn's story quickly. Lucas: That's the thing about agriculture in the summer. A lot can change in two weeks. Right now, cotton is the star, but corn and soybeans are waiting in the wings. Luna: Soybeans are up 1.6 percent this week, so they're chugging along. But nothing like cotton's fireworks. Lucas: Soybeans have their own dynamic with Chinese demand and Brazilian supplies, but we'll save that for another episode. For today, the key takeaway is that not all agricultural commodities move together, even when the macro backdrop is similar. Cotton's got a specific export and supply story that corn doesn't share. Luna: And that's what makes following these individual markets so interesting. If you're just looking at the Bloomberg Agriculture Index, you miss the nuance. Lucas: Speaking of nuance, I want to mention something quickly. This podcast is ad-free and listener-supported, and it's the kind of detailed analysis that we can only keep doing because people chip in a few dollars a month. If you find these breakdowns useful, head over to buy me a coffee dot com slash fexingo — it genuinely makes a difference in keeping the lights on. Luna: Yeah, it's a small thing that adds up. We really appreciate it, and it lets us keep the focus on the numbers and the stories, not on selling ads. Lucas: Alright, back to the markets. One thing I want to flag for the rest of the week: keep an eye on the weekly jobless claims and the ISM manufacturing PMI. Both come out tomorrow and could set the tone for the dollar, which in turn affects commodity prices. Luna: Especially for cotton, since it's dollar-denominated and heavily traded internationally. A stronger dollar could put a lid on the rally. Lucas: Exactly. So the cotton story isn't isolated from the macro picture — it's just got a stronger internal engine right now. That's what we'll be watching. Luna: And for corn, the next big catalyst is the July 11 USDA report. Until then, the market is likely to drift unless weather changes. Lucas: Drift is probably the right word. We'll be back tomorrow to cover whatever the data brings. Thanks for listening.