After losing the key 17,000 yuan/ton level, Zhengzhou cotton futures failed to stabilize. On September 3, the main contract closed at 16,825 yuan/ton, down another 110 yuan. This pullback is not an isolated event but the result of three overlapping pressures: overseas gains already priced in, weakening macro sentiment, and lackluster downstream demand. For textile mills, this may reopen a procurement window, but timing requires caution.
Supply-Demand Balance: Ease vs. Weather Risks
The International Cotton Advisory Committee (ICAC) released its monthly report on September 2, projecting global production of 26.2 million tons for 2026/27, exceeding consumption of 25.9 million tons. On the surface, supply appears loose. However, this estimate assumes ideal weather, and cotton's growing season always carries variability. Regional rainfall anomalies or pest outbreaks could easily shrink the surplus, underpinning prices.
US cotton conditions illustrate this uncertainty. Cotton is entering the boll-opening phase but lags the normal pace, with drought worsening in key regions and quality ratings declining. Weather models indicate continued hot, dry conditions, potentially intensifying the drought. Market expectations of a US production shortfall are rising, and future ratings and abandonment rates will guide overseas prices, directly affecting Chinese import cost expectations.
Industrial Transmission: Weak Peak Season, Inventory Overhang
The traditional peak season has arrived, but downstream recovery is slower than usual. Yarn and fabric mills have raised operating rates, and yarn shipments improved slightly week-on-week. Yet overall inventories remain high, and product destocking is slow, revealing limited actual demand recovery. Reserve cotton sales continue to supplement market supply, offsetting demand improvements and keeping spot trading muted.
For textile mills, procurement strategies should prioritize inventory turnover over price speculation. High yarn inventories mean limited acceptance of high-priced raw materials. If cotton prices fail to rebound strongly, yarn price increases will be difficult, squeezing margins. For foreign trade orders, macro uncertainty and exchange rate volatility push buyers toward smaller, more frequent orders to avoid inventory depreciation risks.
Xinjiang Harvest Ahead of Schedule, Weather Becomes Key Variable
Domestic new cotton harvesting is progressing faster than usual. Xinjiang cotton has entered the key boll-opening period. Southern Xinjiang has been dry with little rain, suitable for opening and drying; northern Xinjiang saw only scattered precipitation early in the week, causing minimal disruption. Based on current growth, defoliant spraying will begin in early September across major production areas, potentially bringing machine-picked cotton to market earlier. This implies supply pressure may arrive sooner, weighing on prices.
However, earlier harvesting also extends the weather risk window. Future precipitation changes will directly affect cotton quality and yields. Prolonged rain or temperature drops could trigger repricing of production and quality expectations. Meanwhile, El Niño-related global production cut expectations persist, and domestic cotton inventories remain at mid-to-low levels, together providing price support.
Outlook and Strategy References
In summary, the cotton market is in a typical wide-range oscillation pattern with pressure above and support below. Pressure comes from reserve sales, high downstream inventories, and a bearish macro environment. Support stems from weather-related production cut expectations, low inventories, and peak-season demand. Short-term directional moves require new catalysts, such as a sharp downward revision in US production or significant downstream destocking; otherwise, prices are likely to remain range-bound.