At 16,825 yuan per ton, the Zheng cotton main contract closed on September 3, down another 110 yuan from the previous day. A day earlier, the market had just lost the key threshold of 17,000 yuan. For market participants accustomed to using round numbers as psychological anchors, this is not just a breach of a number but a sign that long positions accumulated at higher levels are rapidly unwinding.
Data and Expectations: Global Supply-Demand Turns Loose
The latest monthly report from the International Cotton Advisory Committee (ICAC), released on September 2, provides a bearish baseline scenario: global cotton production for 2026/27 is projected at 26.2 million tons, slightly exceeding the consumption forecast of 25.9 million tons, shifting the new season's supply-demand balance from tight to a slight surplus. This shift directly undermines the bullish foundation built by the earlier sharp rise in ICE cotton futures.
However, it is worth noting that this loose expectation rests on the ideal assumption of favorable weather. The cotton growing season is not over, and weather variables remain high in major producing areas. Should abnormal rainfall, drought, or pests occur in Xinjiang or the U.S. belt, the projected surplus could quickly shrink. In other words, this looseness is fragile and subject to weather revisions, potentially providing underlying support for prices.
Industry Transmission: Weak Peak Season and High Inventories
The traditional "Golden September" peak season has arrived, but the recovery in downstream demand is clearly weaker than in previous years. According to public industry data, operating rates at domestic spinning and weaving mills have been steadily rising, and cotton yarn shipment efficiency has improved slightly on a weekly basis, indicating a marginal recovery in end-demand. Yet the slope of this recovery is not steep; overall inventory pressure remains high, and the destocking of cotton yarn is slow, undermining the strength of the peak season.
Meanwhile, the regular release of reserve cotton continues to supplement market circulation, adding supply-side flexibility. The net effect of supply and demand offsetting each other is that spot cotton trading remains dull, prices lack upward momentum, and market sentiment is cautious. For upstream ginners, this implies the spot sales window may not be very wide before new cotton arrives; for downstream textile mills, it means procurement strategies can be more patient, avoiding panic buying at high prices.
Production Updates: Xinjiang Harvest Ahead, U.S. Weather Premium Emerging
The pace of new cotton harvesting is a key variable this season. Xinjiang cotton has entered the boll-opening stage, with overall growth ahead of the same period in previous years. Based on current growth, defoliant spraying will begin in major producing areas in early September, and machine-picked cotton is expected to hit the market earlier than usual. In terms of weather, southern Xinjiang has been dry with little rain recently, which is conducive to boll opening and sun-drying; northern Xinjiang only saw sporadic precipitation early in the week, with minimal impact. This means domestic new cotton supply pressure may be released earlier than expected, exerting phased downward pressure on the futures market.
In contrast, the U.S. cotton growth situation is bearish. U.S. cotton is gradually entering the boll-opening period, but overall progress lags, with drought conditions in major producing areas worsening and crop condition ratings declining. Weather forecasts indicate that hot and dry conditions will persist this week, potentially intensifying the drought. Market expectations for a U.S. production cut are rising, and future condition ratings and abandonment rates will be key indicators affecting external cotton prices. This pattern of "domestic earlier, foreign later" may lead to divergent price trends between domestic and international cotton.
Bull-Bear Battle and Operational Strategies
In summary, the cotton market is in a typical "pressed from above and supported from below" pattern. Support comes from three sides: El Niño-induced global production cut expectations, low-to-mid domestic cotton inventory levels, and the as-yet-unfalsified demand expectations for the golden peak season. Pressure is equally evident: continuous reserve releases, high downstream inventories curbing purchases, fully realized previous bullish factors, and a bearish macro environment. With bull and bear factors intertwined, domestic and international cotton prices are likely to continue fluctuating widely in the short term. A directional breakout will require substantial new supply-demand drivers, such as sudden weather changes in major producing areas or unexpectedly strong peak-season orders.