After breaking the key support level of 17,000 yuan per ton, Zhengzhou cotton futures failed to stage a technical rebound. Instead, the main contract continued to slide to 16,825 yuan/ton on September 3, down another 110 yuan. This decline was not driven by a single bearish factor but resulted from the convergence of overseas gains being priced in, weakening macro sentiment, and crowded long positions. For textile mills, this implies a potentially longer buying window, but also requires vigilance against rebound risks after oversold conditions.
Supply-Demand Balance Tilts
The International Cotton Advisory Committee (ICAC) released its monthly report on September 2, setting a bearish tone: global cotton production for 2026/27 is estimated at 26.2 million tons, about 300,000 tons above consumption expectations, indicating a slight supply surplus. This is the core fundamental pressuring prices. However, cotton's growing season is far more variable than other bulk commodities. Late-season weather anomalies or pest outbreaks could quickly erode the projected surplus. In other words, the current surplus is "paper surplus," not "real surplus," providing a hidden floor under prices.
Faster New Crop Arrival Intensifies Supply Pressure
Domestic new cotton harvest is progressing faster than in previous years. Xinjiang cotton has entered the critical boll-opening period. Dry weather in southern Xinjiang is very suitable for boll opening and drying, while sporadic rain in northern Xinjiang has limited impact. According to current growth, defoliant spraying will start in major production areas in early September, likely bringing machine-picked cotton to market earlier. This means supply pressure will be released sooner than usual. Combined with regular reserve cotton auctions, market circulation resources become more abundant, keeping spot trading sluggish. However, weather remains the biggest variable; sustained rainfall could affect quality and yield, requiring reassessment of supply expectations.
Weak Peak Season Hinders Downstream Transmission
The traditional "Golden September" peak season has arrived, but downstream recovery is slower than expected. Although yarn and fabric mill operating rates are rising steadily and cotton yarn shipments are slightly improving, overall industry inventories remain high, and destocking is slow. This indicates terminal demand is only marginally recovering, far from "boom" levels. More critically, high yarn inventories mean weaving and garment enterprises have limited restocking appetite, restricting cotton purchases to essential needs. This transmission blockage between upstream and downstream means cotton prices lack substantial upward momentum even with peak-season expectations.
International Variable: Rising US Crop Cut Expectations
US cotton growth conditions offer potential bullish fodder. US cotton is entering the boll-opening phase but lags behind schedule, with worsening drought in major production areas and declining crop condition ratings. Weather forecasts indicate hot and dry conditions will persist, intensifying drought stress. Market expectations for reduced US cotton production continue to rise. Subsequent condition ratings and abandonment rates will be key indicators for overseas prices. If US production cuts materialize, ICE cotton could regain upward momentum, transmitting support to Zhengzhou cotton via import costs.
Trading Logic Amid Bull-Bear Battle
In summary, the cotton market is in a typical pattern of pressure from both sides. Support comes from global production cut expectations, low domestic inventories, and peak-season demand hopes; pressure stems from reserve sales, high downstream inventories, and bearish macro sentiment. In the short term, cotton prices are likely to fluctuate widely, with directional breakthroughs awaiting substantive supply-demand catalysts. For industry players, rather than betting on a one-way market, it is wiser to manage inventories and hedge within the range.