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Cotton Prices: From 10-Year Low to 10-Year High in a Blink of Eye. Do You Know Why?

Mainstream experts see no clear reason for cotton's comeback. That's because they're not looking in the right place

by Nico Isaac
Updated: January 05, 2022

For one commodity, 2020-1 has felt a lot like the fairytale Rumpelstiltskin. Only instead of magically spinning straw into gold...

This chart shows that the agricultural sector has successfully spun cotton into a golden uptrend. Between April 2020 and late October 2021, cotton prices soared 48% to their highest level in a decade.

Cotton Cont Liq - ICE-US - weekly bars - 12-31-21

The textile fiber used to make everything from clothing to cardboard, fertilizers and beauty products went from worst-performing "soft" to among the best in 2020. Continuing to soar into 2021, cotton was ultimately coined the "new lumber" by an October 5 Fortune article for its gravity-defying uptrend all the while stealing the hearts of investing trend setters in the 2022 New Year:

Cotton Hedge Funds headline - 1-4-22 - yahoo finance

That's the wow-worthy what of cotton's bumper bull market. There's just one tiny problem.

According to mainstream experts, there is no good explanation for why cotton shot to the skies.

Reads one December 9, 2021 Textile World:

"Reasons for upward trend in cotton prices and future outlook not entirely clear.

"To say the least, it has been an interesting couple of years for the cotton market.

"Since April 2020, cotton prices have moved only in one direction. This has happened despite the emergence of the COVID delta variant, recurring lockdown orders around the world, persistent shipping challenges, inflation, and concerns about the future trajectory of Chinese economic growth."

In a last-ditch effort to give context to cotton's surge, the article fishes from the shallow end of the mainstream pool of explanations. To wit:

"Cotton's undefeated uptrend may be partly due to what has been called the "everything rally" that has spanned financial markets."

Unless you've been on a silent, no technology retreat for the last month, the now ubiquitous "Everything Rally" has become Wall Street's catch-all name for across-the-board advances in traditionally non-correlated markets like crude oil, tech stocks, precious metals and cryptos.

In other words, a rising tide lifts all boats even though some of those boats are supposed to have sunk to the bottom of the ocean floor due to an unprecedented bearish storm.

One of those boats in fact is cotton, which, back in March and April of 2020, looked to be destined for a titanic kind of doom.

Recall, this was the initial wave of the pandemic. Cotton prices circled the drain of a decade low, having experienced one of the largest year-to-date decreases since "the beginning of the century." (March 24

The ramifications of factory shutdowns, retail closures, cratering export sales, and a cease in trade with China were widely expected to be a major bust for cotton demand.

In turn, the first global pandemic since the 1918 Spanish Flu forged the most bearish backdrop of the 21st Century for cotton. These news items from the time take us back:

  • "Cotton Growers Were Recovering from Trade War: Then, Coronavirus Hit" (March 23 Wall Street Journal)
  • "Cotton Remains Under Pressure as Coronavirus Scare Disrupts Trade" (March 6 Hindu Business Live)
  • "Cotton Prices Hit 10-Year Low on Uncertainty Over Coronavirus." (March 24

And, in the words of one March 23 Agripulse:

"You start shuttering retail stores and that affects the manufacturer, which affects mills and then you start to have billions in contracts being canceled...

All of that backs it way up to the farm gate and you see prices down 20% or 30%. It's painting a pretty tough picture [for cotton]."

A tough picture indeed!

And yet, rather than collapsing, cotton prices doubled in value to 10-year highs. Effectively, the year-plus long pandemic didn't weigh on the commodity in the least.

Which brings us full circle to mainstream's "NOT ENTIRELY CLEAR" reason for cotton's formidable comeback.

For our Commodity Junctures Serviceeditor Jeffrey Kennedy, however, that reason is clear as can be.

Here, in the May 2020 Monthly Commodity Junctures, Jeffrey showed this cotton chart, which identified the multi-year sell-off from the 2011 peak as a wave c decline of a larger "triangle" wave pattern. The downtrend was at or near its end, and the next significant move would be to the upside.

In Jeffery's words:

"I think the downside is limited; we're probably 90-95% complete so I'm not looking for significantly lower levels.

"At that point, I think we're going to be looking at potentially a very nice opportunity to the upside as we see cotton prices begin to double over the next few months if not years."

Cotton Cont Liq - ICE-US - monthly bars - 5-29-20

In the July 2, 2020 Daily Commodity Junctures, Jeffrey revisited cotton's chart to alert his subscribers of a major development.

The bottom was now in place. Jeffrey said:

"This week's break of critical resistance at 61.14 in cotton turns the trend up"

From there, cotton prices indeed began to rally. In the ensuing year, the market nearly doubled to its decade peak in October 2021 -- just as Jeffrey had forecast 17 months earlier.

In the world of financial forecasting, there's no such thing as fairytales. There is, however, a way for investors to stay in front of high-confident set-ups in the world's leading commodities.

That way is our Commodity Junctures Service.

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To catch new trends before they emerge, look to the patterns of investor psychology.

Our Commodity Junctures updates you on the short- and long-term wave outlooks for the major players in softs, food, grains, livestock, energy, and more right now, 16+ major commodities in total.

See below to stay in-the-know.

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