In the last week of August, the floor price for central reserve cotton sales was set at 17,228 yuan per ton (grade 3128B). This is a continued decline from previous weeks. For textile mills, the lower floor price means a marginal improvement in raw material costs, but it also reflects subtle changes in the supply-demand balance of the cotton market.
Background
According to the 2026 central reserve cotton sales announcement, reserve cotton has been offered since July 20, with a floor price published weekly. The floor price for week 7 (August 31 - September 4) is based on grade 3128B, while actual transaction prices are calculated batch by batch based on cotton notarized inspection results and the quality differential table issued by the China Cotton Association. This mechanism ensures transparency and fairness, allowing mills to accurately estimate procurement costs.
The continuous drop in the floor price is closely related to the current loose supply and weak demand in the domestic cotton market. The textile industry is in a transition period between the traditional off-season and peak season. Downstream orders have not shown significant growth, yarn prices remain under pressure, and mills have limited acceptance of high-priced raw materials. As a market regulator, the reserve cotton floor price adjustment both follows market trends and guides market expectations.
Industry Impact
From an industry chain perspective, the impact of lower reserve cotton floor prices is asymmetric between upstream planting and downstream consumption. For ginners and traders, a lower floor price means greater selling pressure on their inventories, especially for resources purchased at high prices, increasing the risk of losses. For textile mills, however, this is an opportunity to reduce raw material costs and improve profit margins.
It is worth noting that the floor price is not the actual transaction price; actual prices are adjusted based on quality premiums/discounts. This means that even if the floor price drops, high-quality cotton may still trade at a significant premium. Therefore, mills should not simply use the floor price as the only reference, but should consider their product positioning and quality requirements to comprehensively evaluate cost-effectiveness.
From a timing perspective, there are about two months until the new cotton crop arrives. The continued release of reserve cotton will help smooth the supply gap during the transition period. For mills with low raw material inventories, this may be a suitable window to restock in batches. However, it is important to be cautious: if downstream demand fails to recover, hoarding could increase financial pressure. Mills should flexibly control procurement pace based on order conditions.