Holy Bolly! There Ain't Nothing Soft About This Soft Commodity Now

Between May 2020 and February, cotton prices went from a decade low to a 3-year high! Raise your hand if you saw that coming…

by Nico Isaac
Updated: March 17, 2021

Who you callin' soft?!

Not cotton! Not after the soft commodity has nearly doubled in value over the last year. Exclaims one February 19 report:

"The cotton market on US ICE Futures is having a phenomenal February, gaining almost 12%, its largest advance in a month since its July 2016 rally of 15%. At this month's peak of 90.77 cents per lb, ICE cotton also reached its highest price since July 2018.

The run-up in cotton actually began almost a year ago, from the end of March 2020, when it settled at just under 51.15 cents a lb. From there, it surged some 77% to Friday's rate of around 90.65 cents.

"That effectively meant that the near year-long coronavirus pandemic barely weighed on cotton prices."

Many cotton investors, producers and manufacturers may need to read that last highlighted bit again... and again... and then ask themselves if they need their eyes checked. The reason being -- "weighing on cotton prices" was precisely what the mainstream experts said the pandemic was destined to do!

And not like a light, cotton-ball kind of weight. More like a 2-ton-wrecking-ball kind of weight.

Here, we go back to the beginning of the pandemic in the spring of 2020. Then, cotton had endured one of its largest declines since the beginning of the 21st century, with prices wilting to a decade low. And, as this news item from the time attests, the coronavirus was set to keep cotton committed to the downside: 

"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]." (March 12 Agripulse)

And yet, the picture painted by our May 2020 Monthly Commodity Junctures was the opposite. It alerted investors to the very real possibility that the road ahead for cotton wasn't tough; it was triumphant.

There, our Commodity Junctures editor Jeffrey Kennedy showed a version of this chart below (full Elliott wave count reserved for subscribers) and said:

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

"And then 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."

From there, cotton prices indeed began to rally. In the ensuing year, the market nearly doubled as Jeffrey had forecast 10 months earlier.

Not every Elliott wave forecast works out like this, of course. Markets love to throw curve balls. But relying on the objective patterns of investor psychology instead of the news routinely helps our Commodity Junctures to point out high-confident setups to subscribers.