In early September, the main contract of Zhengzhou cotton futures fell below the key level of 17,000 yuan per ton, closing at 16,825 yuan/ton on September 3, down 110 yuan/ton in a single day. This price level has retreated significantly from earlier highs, yet the market has not seen panic selling, instead showing a stalemate of "pressure above and support below." For the textile industry chain, this level matters not only as a price figure but also as a reflection of deeper changes in the new-season cotton supply-demand landscape.
Supply-Demand Fundamentals: Ease Expectations Coexist with Weather Risks
The latest monthly report from the International Cotton Advisory Committee (ICAC) released on September 2 projects global cotton production of 26.2 million tons for 2026/27, against consumption of 25.9 million tons, implying a surplus of about 300,000 tons—a slightly loose balance. This caps price upside, as the market lacks substantive bullish drivers.
However, the balance sheet is never static. Weather variables during the growing season remain high. Xinjiang cotton has entered the key boll-opening period, with growth ahead of last year. Defoliant spraying will begin in early September across major production areas, likely advancing machine-picked cotton supply. Northern Xinjiang saw scattered rain early in the week, but overall dry conditions favor boll opening and drying; southern Xinjiang also enjoys sunny weather, creating ideal harvest conditions. This suggests domestic new-crop supply pressure may arrive earlier than expected, pressuring prices in the short term.
Meanwhile, drought in US cotton regions continues to worsen, with quality ratings declining. Forecasts indicate persistent high temperatures and low rainfall this week. Market expectations of a US production shortfall are strengthening, with abandonment rates becoming a core variable for international prices. If US output declines more than expected, the global surplus could shrink significantly or even flip to a deficit, lifting the price floor.
Market Sentiment and Downstream Transmission: Cautious Gameplay Amid Weak Recovery
This pullback results from multiple bearish factors rather than a single cause. ICE cotton had rallied earlier, pricing in most positives; hawkish Fed comments added macro pressure; and crowded long positions triggered profit-taking on minor bad news, accelerating the decline. This technical correction, combined with a loose fundamental backdrop, has cooled bullish sentiment.
Downstream textile markets are in the traditional peak season, but recovery is weaker than expected. Domestic spinning and weaving mills are raising operating rates, and yarn shipments have improved slightly week-on-week, indicating marginal demand recovery. However, industry-wide inventories remain high, yarn destocking is slow, and the peak season lacks strength. Reserve cotton auctions continue to supplement supply, keeping spot transactions subdued. This "weak recovery" means downstream buyers have limited appetite for high-priced cotton, purchasing only for immediate needs—unlikely to drive a sustained rally.
For textile enterprises, operating in this price zone is challenging. On one hand, loose global supply and reserve sales cap price gains; on the other, weather disruptions and low inventories provide solid support. In this tug-of-war, companies should focus on inventory management and purchasing pace rather than chasing trends.
Price Outlook and Strategic Responses
In the short term, cotton prices are likely to remain in a wide range. Supportive factors include El Nino-driven global production cut expectations, low domestic inventories, and peak-season demand. Capping factors include reserve sales, high downstream inventories, fully priced-in positives, and a bearish macro environment. Directional breakout requires fresh supply-demand catalysts, such as a sharp deterioration in US crop ratings, abnormal weather during Xinjiang harvest, or stronger-than-expected downstream demand.
Given this, different segments of the chain should adopt differentiated strategies.