Zhengzhou cotton futures settled at an average of 16,673 yuan per ton this week, down 295 yuan or 1.7% from the prior week. The international cotton index (M), reflecting landed costs at Chinese main ports, fell to 15,879 yuan per ton after conversion, a weekly decline of 3.4%. The synchronized weakness across domestic and international markets is no coincidence — the "production shortfall" narrative that supported prices for nearly two months is being repriced by the market.
Why the Shortfall Story Has Stalled
The USDA's September supply and demand report cut U.S. cotton production by 89,000 tons to 2.874 million tons for the 2026/27 season, but the adjustment fell short of market expectations. More critically, the report raised its forecast for global ending stocks, triggering long liquidation. As of September 6, the U.S. cotton good-to-excellent rating fell 5 percentage points week-on-week to 34%, with nearly 60% of producing areas still affected by drought and the drought footprint expanding. The shortfall is objectively intensifying, but the weather premium that was over-traded earlier is being gradually corrected, and the marginal driver has clearly weakened.
The Southern Hemisphere provides a counterweight. Brazil's cotton harvest is in its final stages, with 89.4% completed as of the week ending September 4, 2.5 percentage points ahead of last year. Market forecasts for Brazilian production cluster around 4.02 to 4.5 million tons, suggesting another high-yield season that could offset much of the U.S. shortfall. For buyers, international cotton prices lack fundamental support for further upside in the near term.
New-Crop Opening Price: This Year's Biggest Standoff
Xinjiang cotton boll-opening has reached nearly 50%, ahead of last year's pace, with scattered purchasing already starting in some areas. Field research by the national cotton market monitoring system shows no significant production declines in Alar, Bayingolin, or Aksu, with overall output expected to be flat or slightly lower year-on-year. Ginning mills plan to open purchasing around September 20, with machine-picked cotton opening prices expected at 7.0 to 7.6 yuan per kilogram, well above last year's 6.3 to 6.4 yuan.
Behind this price expectation lies a dilemma for ginners: bid too low and they cannot secure supply; bid too high and they risk repeating the 2023 "rise-then-fall" pattern. Cautious purchasing sentiment suggests actual transaction prices in the early opening period may come in below the expected ceiling. For upstream farmers, opening prices above 7 yuan per kilogram remain attractive; but for downstream spinners, the conflict between rising raw material costs and sluggish yarn price transmission will intensify further.
Domestic C32S combed yarn averaged 23,708 yuan per ton this week, up just 64 yuan or 0.3% from the prior week, while imported yarn prices were essentially flat. Yarn price gains lag far behind cotton, leaving spinning margins under persistent pressure, with raw material procurement focused on just-in-time replenishment. Reserve cotton sales entered their eighth week, with the transaction rate failing to reach full subscription for the first time, falling to 99.35%, and the average transaction price edging lower week-on-week. Spinners are bidding rationally based on orders and quality requirements rather than chasing supply — itself a signal of weak downstream demand.
The Scissors Gap Between Strong Exports and Weak Domestic Demand
Demand is not entirely without bright spots. Customs data show August textile and apparel exports reached $28.57 billion, up 7.7% year-on-year, marking a third consecutive month of growth above 7%. This provides some support to consumption expectations and confirms that external demand resilience remains. But domestic terminal consumption recovery is slow. August CPI rose 0.8% year-on-year, core CPI recovered to 1.0%, and PPI expanded to 3.8%. Upstream cost transmission is strengthening while terminal consumption lags.
At the macro level, the expanding Middle East conflict pushed Brent crude above $109 per barrel, U.S. August core CPI rose 0.3% month-on-month above expectations, and market odds for a September Fed rate hike climbed to nearly 90%, weighing broadly on commodity valuations. China-U.S. trade teams are negotiating a $30 billion reciprocal tariff reduction framework, with the list likely covering apparel, footwear, home goods, and textiles. If implemented, this would provide a marginal boost to cotton market sentiment, but it will not change the supply-demand balance in the near term.
Overall, international cotton prices are expected to remain range-bound to weak in the short term, while Zhengzhou cotton will oscillate within a range as the market weighs new-crop opening prices against the production shortfall narrative. The market's focus has shifted from "how much will production fall" to "where will the opening price settle" and "whether peak-season orders can deliver substantive growth."