After breaching the key support of 17,000 yuan per ton, Zhengzhou cotton futures failed to stage a technical rebound and instead continued their downward drift. On September 3, the main contract settled at 16,825 yuan per ton, down another 110 yuan, with position data suggesting an accelerated unwinding of previously crowded long trades. This decline is not driven by a single bearish factor but by the convergence of three pressures: the realization of external market gains, weakening macro sentiment, and high industry inventories. For textile enterprises, this may reopen a window for raw material procurement, but whether the downside has been fully explored still depends on substantive changes in supply and demand.
Supply-Demand Landscape: A Tug of War Between Loose Expectations and Weather Variables
The International Cotton Advisory Committee (ICAC) released its latest monthly report on September 2, painting a baseline scenario of a slight global surplus for the 2026/27 season: production estimated at 26.2 million tons against consumption of 25.9 million tons, leaving a surplus of about 300,000 tons. On the surface, this does not indicate significant supply pressure, but the market is more concerned about the fragility behind these projections. Weather disruptions and pest risks during the cotton growing season have always been the biggest variables in production forecasts. Should abnormal climate conditions occur in major producing regions, the seemingly solid surplus could quickly erode, which is a key reason why prices have not fallen sharply despite the loose supply-demand signal.
Domestically, Xinjiang cotton has entered its peak boll-opening period, with overall growth ahead of last year's pace. Based on current development, defoliant spraying will begin in major production areas in early September, potentially advancing the listing of machine-picked cotton compared to previous years. Southern Xinjiang has seen dry, sunny weather conducive to boll opening and drying; northern Xinjiang experienced only sporadic rainfall early in the week, with minimal overall disruption. However, industry insiders generally believe that the weather window during the harvest season remains sensitive, and subsequent precipitation changes could cause fluctuations in new cotton quality and yield—a crucial reason why the market is reluctant to turn aggressively bearish.
Downstream Transmission: Weak Peak-Season Performance and Inventory Pressure Curb Purchase Enthusiasm
The traditional "golden September" peak season has arrived, but downstream feedback can only be described as a "weak recovery." Yarn and fabric mills have seen a steady increase in operating rates, and cotton yarn shipments have improved slightly week-on-week, indicating marginal recovery in end-demand. However, this recovery is clearly weaker than in previous years. Overall industry inventory pressure remains high, and the destocking of cotton yarn finished products is slow, directly dampening weavers' willingness to replenish raw materials. At the same time, the regular release of reserve cotton continues to supplement market circulation, and with supply and demand offsetting each other, spot cotton trading remains subdued, with market sentiment leaning cautious.
What does this pattern mean for upstream ginners and traders? On one hand, before the new cotton crop hits the market, reserve cotton sales ensure supply, making it difficult for prices to trend upward. On the other hand, downstream low-inventory strategies imply that if new cotton listing is delayed or quality issues arise, replenishment demand could surge, causing temporary price spikes. For textile enterprises, the more rational approach now is to purchase on an as-needed basis and control raw material inventories rather than gamble on a one-way market.
External Variables: Rising U.S. Crop Cut Expectations and Unresolved Macro Pressure
Internationally, the growth situation for U.S. cotton is evolving bearishly. U.S. cotton is gradually entering its boll-opening phase, but overall growth lags behind schedule, with drought conditions in major producing areas deteriorating and crop condition ratings continuing to decline. Weather forecasts indicate that U.S. cotton regions will remain hot and dry this week, potentially exacerbating drought severity. Consequently, market expectations for a reduced U.S. crop in the new season are strengthening, and upcoming condition and abandonment rate data will be key indicators influencing international cotton prices. If these expectations are confirmed by data, ICE cotton could gain fresh upward momentum, providing external support to the domestic market.
However, macro pressure has not dissipated. Recent hawkish statements from U.S. Federal Reserve officials have weighed on the broader commodity complex. Earlier, ICE cotton had risen substantially, with most bullish factors already priced in and lacking new drivers. Domestically, the market faces the issue of crowded long positions from earlier highs, making it susceptible to profit-taking on minor bearish news, thereby amplifying price volatility. With bullish and bearish factors intertwined, cotton prices are likely to remain range-bound in the short term. A directional breakout will require clarity on new cotton listing progress, U.S. crop condition data, and downstream inventory destocking during the peak season.