At 17,303 yuan per ton, the floor price for central reserve cotton sales in the 8th week of 2026 (September 7-11) is not shocking by itself. But when placed in a time series, the signal becomes clear: the floor price has been sliding for several weeks, putting domestic cotton in a distinctly weak channel. For textile mills, this is both a window to lower raw material costs and a period demanding caution against inventory write-downs.
Event Background
China National Cotton Reserves Corporation began the 2026 central reserve cotton sales on July 20, announcing a floor price every week. The 8th-week price continued its decline from late July. This price is not a fixed tag; it is benchmarked to standard grade 3128B and adjusted batch by batch based on the results of cotton notarized inspection and the quality differential table published by the China Cotton Association. The mechanism is designed to provide a transparent anchor for the market. Mills can estimate the week's procurement cost range and compare it with Xinjiang cotton and imported cotton quotes. But the continuous decline also suggests that the policy side sees a loose supply-demand balance, with little upward support for prices. In major textile clusters such as Shandong, Henan, and Jiangsu, mills have shown increasing participation in reserve cotton auctions. The reasons are clear: although spot Xinjiang cotton prices are also falling, reserve cotton offers advantages in quality consistency and delivery stability, and the widening price gap after the floor price cut enhances its cost-effectiveness.
Industry Impact
The impact of a lower floor price is not one-way. For mills, lower cotton costs directly improve immediate profits, especially for those producing 32s and 40s pure cotton yarn, where cotton accounts for over 70% of costs. A 100 yuan per ton drop in the floor price translates into roughly 150 yuan per ton lower yarn cost (considering waste). But can yarn prices hold firm? The reality is that downstream orders for gray fabric and garments have not rebounded strongly. Domestic demand remains weak, and exports are affected by exchange rates and shipping disruptions. Weaving mills operate at around 70% capacity and purchase yarn on a hand-to-mouth basis. This means that the benefit of lower cotton prices is unlikely to stay entirely with spinners; part will be captured by downstream through price pressure. More concerning is the China-foreign cotton price spread. International cotton prices are suppressed by expectations of higher output in major producing countries, with ICE futures hovering around 70 cents per pound, translating to an imported cotton landed price of about 15,500 yuan per ton—nearly 1,800 yuan below the reserve floor price. Although tariff-rate quotas are limited, the persistent spread encourages mills to prefer imported cotton, dampening domestic demand and further pressing spot prices. For traders and ginners, the lower floor price means greater impairment pressure on their high-cost inventories. Some who hoarded cotton earlier are now selling at a loss, adding to market supply and forming a negative feedback loop of "falling prices lead to more selling, which pushes prices down further."