On September 2, Zhengzhou cotton futures fell below the key psychological level of 17,000 yuan per ton, and continued to decline the next day to 16,825 yuan per ton, down 110 yuan per day. This pullback is not an isolated event but the result of a triple overlay of exhausted external bullish factors, weakening macro sentiment, and fragile trading structure. For the textile industry chain, the downward shift in cotton prices means a phased relief in raw material cost pressure, but whether downstream can absorb it still needs to be observed in the peak season.
Background
The direct trigger of this decline was the excessive rise in ICE cotton earlier, as the market had already digested most bullish expectations. Meanwhile, hawkish statements from Fed officials brought macro valuation pressure to commodities. More critically, the crowded long positions at high levels made the market vulnerable; a small negative trigger led to concentrated profit-taking, causing a stampede-like correction, which is not uncommon in capital-driven markets.
From a fundamental perspective, ICAC's latest monthly report released on September 2 estimated global cotton production for 2026/27 at 26.2 million tons, slightly higher than the consumption forecast of 25.9 million tons, indicating a generally loose supply-demand balance for the new season. This data sets a ceiling for cotton prices. However, the growing season is fraught with variables; later weather anomalies and pest outbreaks are likely to compress the current surplus, providing support to prevent deep declines.
Domestically, Xinjiang cotton has entered the key boll-opening period, with growth ahead of the same period last year. Defoliant spraying will begin in early September across major production areas, and machine-picked cotton may hit the market earlier than expected. This week, southern Xinjiang is dry with little rain, favorable for boll opening and drying; northern Xinjiang saw only scattered precipitation early in the week, with minimal disruption. This implies that the supply pressure from new cotton may be released earlier than anticipated, posing a potential bearish factor for the market.
Industry Impact
Downstream, we are in the traditional textile peak season. Yarn and fabric mills are seeing steady increases in operating rates, and yarn shipment efficiency has improved slightly week-on-week, indicating marginal recovery in end demand. However, the recovery is weaker than expected, with high inventory pressure across the industry and slow destocking of yarn products. The regular release of reserve cotton continues to supplement market circulation, and with supply and demand offsetting each other, spot cotton transactions remain dull, and market sentiment is cautious.
For buyers, the decline in cotton prices reduces raw material costs, but high inventories imply that terminal orders have not truly increased, so blind restocking still carries risks. For foreign trade enterprises, the coexistence of weather speculation abroad and domestic supply pressure, along with exchange rate and freight fluctuations, may erode profits, necessitating flexible use of hedging tools to manage price risks.
Internationally, the US cotton growth situation is bearish. US cotton is gradually entering the boll-opening period, but overall progress lags, drought in major producing areas continues to worsen, and quality ratings are declining. Weather forecasts indicate that high temperatures and little rain will persist this week, potentially exacerbating drought conditions, strengthening market expectations of a US production cut. Subsequent quality and abandonment rate data will be core indicators affecting external prices, which will also transmit to domestic import cost expectations.
Practical Recommendations
For Buyers - Build positions in batches, avoid chasing highs or selling lows, and watch support below 16,800 yuan per ton. - Prioritize digesting current inventory, and replenish after new cotton prices become clear. - Monitor Xinjiang weather and harvest progress; if listing is delayed, lock in supply early.
For Foreign Trade Enterprises - Use Zhengzhou cotton hedging to lock in costs for forward orders, avoiding volatility from external weather speculation. - Closely track US cotton quality and abandonment rates, and adjust US cotton purchasing rhythm. - Leave room in quotes for exchange rate and freight flexibility to prevent profit erosion.
In summary, the current cotton market is fiercely contested between bulls and bears, with prices under pressure from both sides. Support comes from the El Niño-induced global production cut expectations, low domestic inventories, and peak season demand; pressure comes from reserve releases, high downstream inventories, and a bearish macro environment. In the short term, domestic and external cotton prices are likely to remain in a wide range, and directional breakthroughs await substantive new drivers in supply and demand. Textile enterprises should remain cautious and flexible.