Hedge funds have turned net-long on cotton for the first time in two years, as surging energy prices linked to the Iran conflict improve the competitiveness of natural fibres versus synthetic alternatives, according to a report by Bloomberg citing data from the Commodity Futures Trading Commission (CFTC).
The CFTC’s figures show that long positions in New York cotton futures have recently exceeded shorts by a wide margin, marking a clear reversal from the sustained bearish positioning seen since 2024.
The shift has been driven in part by higher crude oil prices, which have increased input costs for petrochemical-based textiles such as polyester and nylon. As a result, cotton is becoming more attractive to textile manufacturers, particularly in Asia, where mills rely heavily on synthetic fibre feedstocks sourced from the Gulf region.
At the same time, supply-side concerns are reinforcing the bullish trend. Rising fertiliser costs, persistent drought conditions in key US growing regions, and expectations of a global production deficit in the 2026–27 season are tightening the outlook for future supply.
Cotton futures have climbed sharply since the onset of the conflict, reaching multi-year highs, with analysts noting that momentum could persist even if energy prices stabilise.
While prices have shown some short-term volatility, broader positioning data indicates the strongest bullish sentiment in the market in roughly two years, reflecting both demand-side substitution effects and tightening supply expectations.
