At 16,673 yuan per ton, the settlement price of China's Zhengzhou cotton futures main contract fell 295 yuan week-on-week. Meanwhile, ICE cotton settled at 86.97 cents per pound, down 2.6%. Both markets weakened in tandem, driven by the same logic: the weather premium is being corrected, and the production-cut narrative is losing traction.
The Expectation Gap Behind the Price Pullback
Domestically, the China Cotton Price Index B, representing standard-grade lint in the interior, averaged 18,060 yuan/ton, down 137 yuan. The International Cotton Index (M), reflecting landed prices at Chinese main ports, equated to an import cost of 15,879 yuan/ton, a drop of 3.4%. The spread between domestic and international prices widened to 2,181 yuan/ton, up 429 yuan from the previous week. This widening spread is noteworthy: it enhances the comparative advantage of imported cotton, offering a marginal cost improvement for mills relying on imported fiber.
Internationally, the USDA's September supply and demand report cut U.S. cotton production by 89,000 tons to 2.874 million tons for 2026/27, but this adjustment fell short of market expectations. More critically, the report raised its forecast for global ending stocks, triggering profit-taking among longs. U.S. cotton good-to-excellent ratings fell 5 percentage points to 34%, with nearly 60% of producing areas still affected by drought. However, the market had already over-traded the weather theme, and marginal momentum has clearly faded.
Brazil's bumper crop is providing a counterbalance. As of the week ending September 4, the 2025/26 Brazilian cotton harvest reached 89.4%, 2.5 percentage points ahead of last year. Market estimates for Brazil's production range from 4.02 to 4.5 million tons. This high-yield southern hemisphere outlook significantly dilutes the supply impact of the U.S. production cut.
Opening Price vs. Demand: The Core Tug-of-War
As China's new cotton season approaches, Xinjiang's boll-opening rate has reached nearly 50%, faster than last year, with scattered purchasing already beginning in some areas. According to field surveys by the national cotton market monitoring system, no significant production declines have been observed in Alar, Bayingolin, or Aksu, with overall output expected to be flat or slightly lower year-on-year.
The real market mover is the opening price. Ginning mills plan to start purchasing around September 20, with machine-picked cotton expected to open at 7.0-7.6 yuan/kg, compared to 6.3-6.4 yuan/kg last year. A rise of over 20% means what exactly? For ginners, acquisition costs will surge, but whether downstream yarn prices can transmit this increase remains uncertain. The memory of the 2023 "rise then fall" pattern still weighs on purchasing sentiment, keeping buyers cautious.
On the downstream side, mill operating rates are stable with slight gains, and new orders have improved marginally but remain limited. Profitability continues to be squeezed, and raw material procurement is mainly hand-to-mouth. This week marked the eighth week of reserve cotton sales, with the subscription rate failing to reach full for the first time, dropping to 99.35%, while the average transaction price edged lower. As of September 11, cumulative central reserve cotton sales exceeded 320,000 tons. The decline in subscription rate is itself a signal: mills are bidding rationally based on orders and quality needs, no longer chasing prices blindly.
Export data offers some support. Customs data show that August textile and apparel exports reached $28.57 billion, up 7.7% year-on-year, the third consecutive month above 7% growth. However, this stability stems more from order front-loading and price factors, while actual end-consumer recovery remains slow.
Macro Variables and the Outlook
On the macro front, geopolitical disruptions and rate hike expectations are jointly weighing on risk appetite. Middle East conflicts pushed Brent crude above $109 per barrel. U.S. core CPI rose 0.3% month-on-month in August, exceeding the 0.2% expectation, pushing market-implied odds of a September Fed hike to nearly 90%. Tightening financial conditions are pressuring commodity valuations broadly.
Regarding China-U.S. trade talks, on September 10 the Ministry of Commerce stated that both sides are negotiating a $30 billion reciprocal tariff reduction framework. Market expectations suggest the tariff cut list is likely to cover apparel, footwear, home goods, and textiles. If implemented, this would provide a substantial boost to end-demand expectations across the cotton textile chain.
Domestic policy is also releasing marginal positives. August core CPI rebounded to 1.0%, and PPI growth widened to 3.8%, indicating stronger upstream cost transmission. The "Financial Powerhouse Construction 15th Five-Year Plan" explicitly proposes to "improve futures market product layout and enhance commodity price influence," while consumer loan interest subsidies supported about 1.88 trillion yuan in household consumption in the first seven months. If these policy directions materialize, they could improve financing conditions and risk management tools for cotton textile enterprises.
In summary, the USDA report provided no new bullish drivers, and supply pressure is building as the U.S. harvest progresses, suggesting international cotton prices may remain range-bound with a weak bias in the short term. Domestically, with the new crop opening imminent, the tug-of-war between purchase prices and production-cut expectations will dominate the board. Continued reserve cotton sales supplement supply, while downstream demand improvement remains limited. Zhengzhou cotton is likely to stay range-bound in the near term. Key focuses include the actual opening price and real changes in peak-season orders, while external risks from Fed rate hikes and geopolitical shifts warrant vigilance.