Soft Commodities in Q4 and 2025- What are the Prospects for Q1 2026 and Beyond?

ICE cotton futures declined 2.28% in Q4 2025, settling at 64.27 cents per pound. The cotton futures fell 6.04% in 2025. The cotton futures reached a multi-year high of $1.5595 per pound in Q2 2022 before declining. In 2025, the nearby cotton futures traded in a narrow range of 60.80 to 69.75 cents per pound. The nearby cotton futures’ price was marginally higher in early 2026.

ICE Arabica coffee futures declined 6.99% in Q4, settling at $3.4865 per pound. The continuous Arabica coffee futures contract posted a 9.04% gain in 2025.

Arabica coffee futures reached a record high of $4.3795 per pound in Q4 2025. In early 2026, the coffee futures market remained bullish. Coffee was the only soft commodity in a bullish trend as of the end of 2025. Adverse weather conditions in Brazil, the world’s leading coffee-producing country, have driven prices higher. Arabica coffee futures prices for March 2026 delivery were higher at above the $3.60 per pound level on January 9.

As with all agricultural commodities, the weather across the critical growing regions will dictate the path of least resistance for prices. Brazilian weather and crop issues will determine the path of least resistance of sugar, coffee, and FCOJ prices. Weather, crop diseases, and political factors in West Africa, namely the Ivory Coast and Ghana, the world’s leading producers, will dictate the path of cocoa prices. While cotton’s price path will be a function of production from China, India, Brazil, the U.S., Pakistan, and Australia.

Rising production costs due to inflation support all commodity prices in early 2026. Meanwhile, cyclicality suggests that prices fall to levels at which production slows, inventories decline, and consumers increase their consumption. The two most likely candidates for rallies, given the price levels at the end of 2025, are cotton and sugar prices, which have been steadily declining over the past two years.

Soft commodities were the best-performing sector of the raw materials asset class in 2023 and 2024, posting gains of 24.04% and 58.14%, respectively. Commodity cyclicality also suggests that prices rise to levels where production increases, inventories build, demand decreases, and prices turn lower. In 2025, the soft commodity sector, excluding world sugar and cotton, experienced cyclical effects. Time will tell if cotton and sugar prices can recover in 2026, but cyclicality favors the upside. Meanwhile, FCOJ, cocoa, and Arabica coffee prices remain historically high, so we should expect continued volatility in the sector over this year.

On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com