Zhengzhou cotton futures broke below the 17,000 yuan per ton mark in early September, closing at 16,825 yuan/ton, down 110 yuan in a single session. This level loss was not accidental but resulted from a confluence of factors: external gains being fully priced in, weakening macro sentiment, and crowded trading positions. For the textile industry chain, a lower cotton price center means phased relief in raw material costs, but whether downstream players can repair profits depends on actual demand absorption.
Supply-Demand Data: Loose Expectations vs. Output Cut Risks
The International Cotton Advisory Committee (ICAC) September report projects global cotton production at 26.2 million tons for 2026/27, exceeding the consumption forecast of 25.9 million tons, suggesting a slightly loose supply-demand balance. However, this surplus is based on ideal weather assumptions; cotton growing seasons are highly variable, and any abnormal rainfall or pest outbreaks in major producing areas could quickly shrink the surplus. In other words, the current loose expectation is more a 'promissory note' than a fait accompli.
Domestically, Xinjiang cotton has entered the peak boll-opening period, with growth ahead of the same period last year. Defoliant spraying will begin in early September across major production areas, potentially advancing machine-picked cotton market arrivals. This implies that new supply pressure may release earlier, exerting phased downward pressure on the spot market. Meanwhile, regular reserve cotton auctions continue to supplement market circulation, further easing supply tightness.
Industry Impact: Weak Recovery in Peak Season vs. High Inventories
The downstream textile market is in the traditional 'Golden September' peak season, with yarn and fabric mills seeing steady increases in operating rates and slight improvements in cotton yarn shipment efficiency, indicating marginal demand recovery. However, the recovery is clearly weaker than in previous years, with high industry-wide inventory pressure and slow destocking of cotton yarn suppressing mills' restocking intentions. Consequently, spot cotton trading remains dull, and market sentiment is cautious.
Notably, the international market presents bearish signals for US cotton: drought in major producing areas is worsening, quality ratings are declining, and expectations for US output cuts are rising. If subsequent quality and abandonment data deteriorate further, external prices may gain support, transmitting to domestic Zhengzhou futures. This implies that domestic and foreign cotton prices may diverge temporarily, and the price gap between imported and domestic cotton will influence textile mills' raw material procurement strategies.
Market Outlook: Risks and Opportunities in Wide Fluctuations
The current cotton market shows a pattern of 'pressure above, support below.' Pressure comes from reserve sales, high downstream inventories, and realized gains; support derives from global output cut expectations, low-to-medium domestic inventories, and peak season demand expectations. In the near term, domestic and foreign cotton prices are likely to continue fluctuating widely, with directional breakthroughs awaiting substantive supply-demand drivers, such as sudden weather changes in production areas or a surge in terminal orders.
For textile enterprises, low cotton prices are not entirely positive. If downstream orders do not improve significantly, profit gains from lower raw material costs may be offset by falling finished product prices. Conversely, if peak season demand exceeds expectations, current prices could prove to be a temporary low. Therefore, companies should avoid one-sided bets, use futures tools to lock in processing margins, and closely monitor Xinjiang harvest progress and US cotton quality ratings to adjust inventory strategies dynamically.