16,673 yuan per ton. That was the average settlement price of the Zhengzhou cotton futures main contract this week, down 295 yuan or 1.7% from the prior week. The figure itself is hardly dramatic, but its timing matters: it lands just as the new crop prepares for concentrated market arrivals, signalling that the weather premium traders once chased is being steadily unwound.
Price Signals: Domestic and Overseas Markets Weaken in Tandem
The China Cotton Price Index B averaged 18,060 yuan/ton, down 0.8% week-on-week. Supply-side pressure comes from two directions: new crop arrivals are imminent, and reserve cotton sales entered their eighth week, with cumulative transactions exceeding 320,000 tons. Notably, the reserve auction subscription rate fell below full for the first time, easing to 99.35%, with the average transaction price dipping slightly. This suggests spinning mills have shifted from aggressive bidding to rational, need-based restocking.
International prices fell harder. 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 cotton now sits 2,181 yuan/ton above international levels, with the spread widening by 429 yuan from the previous week. A wider spread enhances the comparative advantage of imported cotton, opening a window for export-oriented mills to adjust their raw material procurement mix.
Yarn markets showed divergence. Domestic C32S carded yarn averaged 23,708 yuan/ton, up 0.3%, while imported yarn averaged 23,715 yuan/ton, essentially flat, leaving regular imported yarn just 7 yuan above domestic. The strength of domestic yarn reflects mills running at stable-to-slightly-higher capacity with modest order improvement, though profit margins remain under pressure. Polyester staple fibre rose 285 yuan to 8,447 yuan/ton, meaning the substitution economics between chemical fibres and cotton warrant fresh evaluation.
Supply-Demand Tug-of-War: Crop Reduction Premium Fades as Brazilian Output Offsets
The USDA September supply and demand report was the direct trigger for the sentiment shift. It cut 2026/27 US cotton production by 89,000 tons to 2.874 million tons, but the reduction fell short of market expectations, and global ending stocks were revised upward rather than down, prompting long liquidation. As of September 6, the US cotton good-to-excellent rating fell 5 percentage points week-on-week to 34%, with nearly 60% of producing areas still affected by drought. The crop reduction narrative remains objectively intact, but its marginal driving force has clearly diminished.
The Southern Hemisphere provides a counterweight. Brazil's harvest is entering its final stage, reaching 89.4% as of the week ending September 4, 2.5 percentage points ahead of last year. Market production forecasts cluster between 4.02 and 4.5 million tons, suggesting another high-yield season that will partially offset the US shortfall. International cotton prices therefore lack further upward momentum in the near term.
Demand shows marginal improvement. US upland cotton net export sales reached 16,800 tons in the week ending September 3, up 10,600 tons from the prior week. Domestically, customs data show August textile and apparel exports at $28.57 billion, up 7.7% year-on-year, marking the third consecutive month above 7% growth. Stable exports offer some support to consumption expectations, but whether this translates into sustained yarn purchasing depends on actual peak-season order flows.
The Opening-Price Standoff: Battle Lines Drawn at 7 Yuan
Xinjiang cotton boll-opening has reached nearly 50%, ahead of last year, with scattered purchasing already underway. According to on-site surveys by the national cotton market monitoring system, no significant production declines have appeared in Alar, Bayingolin, or Aksu, with overall output expected to be flat to slightly lower year-on-year. Ginning mills plan to start buying around September 20, with machine-picked cotton opening prices expected at 7.0-7.6 yuan/kg, well above last year's 6.3-6.4 yuan/kg.
Purchasing sentiment is cautious, with ginners wary of repeating the 2023 pattern of an early rally followed by a slump. Behind this price expectation lies a multi-party standoff: farmers' reluctance to sell, ginners' urge to secure supply, futures hedging space, and the supply cap from continuous reserve sales. If the opening price starts high, it will lift lint costs in the short term, but if downstream acceptance proves insufficient, the risk of a mid-term pullback cannot be ignored.
On the macro front, Middle East conflict pushed Brent crude above $109/barrel, while US August core CPI rose 0.3% month-on-month, above expectations, lifting market-implied odds of a September Fed rate hike to nearly 90% and pressuring commodity valuations. China-US trade teams are negotiating a $30 billion reciprocal tariff reduction framework; if the list covers apparel, footwear, and textiles, it would provide a marginal boost to cotton market sentiment. The "Financial Powerhouse" 15th Five-Year Plan explicitly calls for improving futures market product layout and enhancing commodity pricing influence, with consumer loan interest subsidies supporting about 1.88 trillion yuan in consumer spending in the first seven months. If these policy directions materialise, they could gradually improve financing conditions and end-consumer expectations across the cotton textile chain.