After breaking the 17,000 yuan per ton threshold, Zhengzhou cotton futures continued to slide, closing at 16,825 yuan on September 3, down another 110 yuan. This correction is not an isolated event but a confluence of external factors: overseas gains were fully priced in, macro sentiment turned cautious, and domestic supply-demand fundamentals loosened. For the textile chain, a lower price center means a new window for raw material procurement, but whether downstream can absorb it depends on the strength of the peak season.
Background
According to the latest ICAC monthly report, global cotton production for 2026/27 is estimated at 26.2 million tons, 300,000 tons higher than consumption expectations, shifting the supply-demand balance from tight to loose. This is the core fundamental factor weighing on prices. However, production estimates assume ideal weather; uncertainties exist in major producing areas. In Xinjiang, the boll-opening period has been generally favorable, but the US cotton belt is suffering from worsening drought, with lower crop conditions and rising减产 expectations.
Domestically, new crop harvesting is ahead of schedule. Xinjiang's main producing areas began applying defoliants in early September, potentially bringing machine-picked cotton to market earlier than usual. This means supply pressure will emerge sooner, combining with regular reserve sales to establish a phase of ample supply.
Industry Impact
The price drop affects upstream and downstream differently. Ginners face a pricing dilemma for seed cotton: if futures remain weak, purchase prices will fall, potentially lowering farmers' income expectations; but if weather disruptions later fuel output reduction expectations, seed cotton prices could rebound, increasing procurement risks.
Downstream textile mills see a phase of benefit. Spinning and weaving plants are running at higher utilization rates, and yarn shipments have improved week-on-week, but destocking remains slow, with high inventory pressure limiting raw material purchases. The peak season recovery is weaker than expected, with limited new orders, prompting mills to maintain hand-to-mouth buying rather than stocking up aggressively on price dips.
Notably, ICE cotton futures had already priced in most positives, and hawkish Fed comments added macro pressure. Crowded long positions triggered profit-taking on small bearish news. This technical correction contrasts with overseas output reduction expectations, weakening the correlation between domestic and international cotton prices, and widening the spread volatility. Mills using imported cotton should watch exchange rates and tariff policy changes for extra costs.