The price gap between domestic and international cotton has widened to 2,181 yuan/ton, up 429 yuan/ton from the previous week. This widening spread means imported cotton is becoming more cost-competitive, opening a procurement window for export-oriented mills.
Price Signals: Divergence and Cost Transmission
Zhengzhou cotton futures settled at an average of 16,673 yuan/ton this week, down 295 yuan/ton or 1.7% from the prior week. The China Cotton Price Index B averaged 18,060 yuan/ton, down 0.8%. Internationally, ICE cotton futures averaged 86.97 cents/lb, down 2.6%, while the International Cotton Index (M) landed cost equivalent was 15,879 yuan/ton, down 3.4%.
Domestic yarn outperformed imported yarn. Chinese C32S carded yarn averaged 23,708 yuan/ton, up 0.3%, while the same specification from major import sources averaged 23,715 yuan/ton, essentially flat. The premium of imported yarn over domestic narrowed to just 7 yuan/ton. Polyester staple fiber rose 285 yuan/ton to 8,447 yuan/ton, continuing to build cost-side substitution pressure on cotton.
The core contradiction: raw material spreads are widening, but yarn spreads are converging. For spinners, the theoretical margin from using imported cotton is improving, yet imported and domestic yarn are nearly at parity, suggesting competitive pressure in the international yarn market has not eased despite falling raw material costs.
Supply-Demand Game: New Crop Pricing and Reserve Sales
Xinjiang cotton boll-opening progress is near 50%, faster than last year, with scattered purchasing already starting. According to on-site surveys by the national cotton market monitoring system, no significant production decline has been observed in Alar, Bazhou, or Aksu, with overall output expected to be flat or slightly lower year-on-year. Ginning mills plan to start purchasing around September 20, with machine-picked cotton opening prices expected at 7.0-7.6 yuan/kg, notably higher than last year's 6.3-6.4 yuan/kg.
Purchasing sentiment is cautious, with concerns about a repeat of the 2023 "rise then fall" pattern. Why are opening price expectations high but sentiment cautious? Because production decline expectations are fading. The weather premium previously over-traded is being corrected, and marginal momentum has clearly weakened.
Internationally, the USDA September supply-demand report cut 2026/27 U.S. cotton production by 89,000 tons to 2.874 million tons, within market expectations. 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 production areas still affected by drought. However, Brazil's cotton harvest is wrapping up, with 89.4% completed as of September 4, 2.5 percentage points ahead of last year, and market production forecasts of 4.02-4.5 million tons could offset U.S. declines.
Reserve cotton sales entered their 8th week, with the transaction rate failing to reach full subscription for the first time, falling to 99.35%, and the average price slightly lower week-on-week. As of September 11, cumulative central reserve cotton transactions exceeded 320,000 tons. The declining transaction rate is a subtle signal: mills are bidding rationally based on orders and quality needs, no longer scrambling to buy.
Macro Variables: Tariff Talks and Financial Policy
On September 10, the Ministry of Commerce stated that China-U.S. trade teams are negotiating a $30 billion reciprocal tariff reduction framework. Market expectations suggest the tariff reduction list may cover apparel, footwear, home goods, and textiles. If implemented, it would boost cotton market sentiment, though the timing remains uncertain.
On the same day, the State Council Information Office held a briefing on the "15th Five-Year Plan," officially releasing the "Financial Powerhouse Construction 15th Five-Year Plan," which explicitly calls for "improving futures market product layout and enhancing commodity price influence." It also disclosed that consumer loan interest subsidies supported about 1.88 trillion yuan of household consumption in the first seven months. If these policy directions are gradually implemented, they may marginally improve financing conditions, risk management, and end-consumer expectations for the cotton textile chain.
External macro pressures cannot be ignored. Middle East conflicts have expanded, Brent crude broke above $109/barrel, and inflation expectations are rising. U.S. August core CPI rose 0.3% month-on-month, above the expected 0.2%, pushing market expectations for a September Fed rate hike to nearly 90%. Tightening financial conditions are weighing on commodity valuations.
Export data provides some buffer. Customs data show August textile and apparel exports reached $28.57 billion, up 7.7% year-on-year, maintaining above 7% growth for the third consecutive month. This growth supports consumption expectations, but it is important to note that export growth coexists with weak domestic demand, mill profits remain under pressure, and raw material procurement is mainly need-based replenishment.