The domestic cotton market is experiencing a significant downward shift in its price center. The floor price for the 8th week (September 7-11) of 2026 central reserve cotton sales, announced by China National Cotton Reserves Corporation, has fallen to 17,303 yuan per ton (based on grade 3128B). This marks a notable decline from earlier weeks, implying that textile enterprises now face a relatively low raw material cost range. However, the temptation of low prices coexists with the risk of inventory depreciation, making procurement decisions more difficult.
Background
Reserve cotton sales are a key tool for the state to regulate the cotton market. The floor price is not set arbitrarily; it is calculated based on recent market average prices and quality difference tables issued by the China Cotton Association. The week-on-week change in the floor price directly mirrors the trend of domestic cotton prices during the auction week—when the spot market weakens, the floor price adjusts downward, and vice versa. This mechanism makes the reserve floor price a sensitive indicator of short-term domestic cotton price trends.
Timing is also crucial. The 2026 reserve cotton sales started on July 20 and have now entered the eighth week. As the sales cycle progresses and the new cotton harvest season approaches, market supply expectations tend to loosen, which may be an important background for the downward pressure on the floor price. For textile enterprises that rely on auctions for raw materials, a lower floor price means they can purchase more cotton with the same funds, but it also signals that prices may continue to weaken. Companies must weigh between "buying low now" and "waiting for even lower prices."
It is worth noting that the daily floor price for each batch of reserve cotton is not uniform. It is calculated based on the standard-grade floor price, adjusted by the results of notarized inspection and quality difference tables. This means that actual transaction prices vary between batches, with higher-quality batches commanding premiums and lower-quality ones possibly selling below the floor price. For cotton-consuming enterprises, merely tracking the floor price is insufficient; they need to select suitable batches based on their product positioning.
Industry Impact
The floor price reduction primarily affects the raw material cost structure of textile enterprises. With a floor price of 17,303 yuan per ton, the cost of lint cotton has dropped by several hundred yuan per ton compared to earlier peaks. For yarn manufacturers with already thin profit margins, this alleviates some cost pressure. Especially when downstream order prices lag, upstream cost concessions can provide more bargaining space or directly improve short-term profitability.
However, in a price downtrend, enterprises often fall into the psychological trap of "buying on rising prices, not falling ones." If cotton prices continue to weaken, current inventories may incur mark-to-market losses, eroding the original cost advantage. Historical experience suggests that reserve floor prices often lag behind spot price movements. When the floor price is significantly lower than the spot price, it often signals a phase bottom; when the gap narrows or reverses, caution is needed for further downside risk. The current floor level is relatively low within the year, but there is no clear stabilization signal yet, so enterprises should avoid full-position operations.
For upstream ginners and traders, the lower floor price intensifies market competition. On one hand, the injection of low-priced reserve cotton increases market supply, squeezing the sales space of high-cost spot cotton. On the other hand, the execution of quality difference tables makes it harder to sell low-grade cotton at high prices, forcing processing enterprises in industrial belts to improve seed cotton procurement quality. Ginners in Xinjiang, Shandong, Hebei, and other major cotton regions need to reassess inventory costs, and some may face loss-making sales for previously high-priced lint cotton.
From the downstream demand perspective, the textile industry is currently in the traditional "golden September, silver October" restocking period. Weaving enterprise operating rates are recovering, providing rigid support for cotton demand. The floor price reduction coincides with the start of the peak season, which will stimulate restocking enthusiasm to some extent. However, uncertainty in export orders remains the biggest variable—consumption recovery in major overseas markets, exchange rate fluctuations, and trade policy changes may all affect actual cotton demand. Therefore, whether this price reduction can effectively destock remains to be seen, and the auction transaction rate in the coming two weeks will be a key indicator.