16,673 yuan per ton. That was the average settlement price for Zhengzhou cotton futures this week, down 295 yuan or 1.7% from the prior week. Meanwhile, the international cotton index (M), which reflects landed import costs, fell 3.4% week-on-week to an equivalent of 15,879 yuan per ton. The simultaneous decline in both domestic and international prices is not a common occurrence, and it signals something more concerning than a one-sided drop: supply-side pressure is transitioning from expectation to reality, while demand-side recovery has yet to keep pace.
Supply Side: Reserve Sales and New Crop Arrivals Create a Double Bind
The key variable in the domestic market comes from the pace of supply. Reserve cotton sales have entered their eighth week, and for the first time the auction clearance rate failed to reach full subscription, falling to 99.35%, with the average transaction price edging slightly lower. This seemingly minor shift reveals that spinning mills are moving from 'panic buying' to 'buying on demand' — factories are no longer worried about securing supply, but are rationally bidding based on order quality requirements. As of September 11, cumulative central reserve cotton transactions exceeded 320,000 tons, a considerable volume.
The Xinjiang new crop is also progressing faster. Boll-opening rates are approaching 50%, ahead of last year, and scattered purchasing has already begun in some areas. Field research by the national cotton market monitoring system shows no significant production declines in major growing regions such as Alar, Bayingolin, and Aksu, with overall output expected to be flat or slightly lower year-on-year. Ginning factories plan to begin purchasing around September 20, with machine-picked cotton opening prices expected at 7.0-7.6 yuan/kg, compared to only 6.3-6.4 yuan/kg last year.
What does this price gap mean? For ginners, high opening prices mean significantly increased purchasing capital pressure. If subsequent lint sales prices fall short of expectations, losses could accumulate rapidly. For textile enterprises, the contradiction between rising raw material costs and limited yarn price gains will become more acute — domestic C32S combed yarn averaged 23,708 yuan/ton this week, up only 64 yuan or 0.3% from the prior week, far less than the volatility on the raw material side.
International Front: USDA Report Fails to Provide Fresh Bullish Momentum
The weakness in international cotton prices has its own logic. The USDA's September supply and demand report cut its 2026/27 US cotton production forecast by 89,000 tons to 2.874 million tons, but this adjustment did not exceed market expectations, and global ending stocks were actually revised upward, triggering profit-taking by longs. 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 production decline expectation is objectively still strengthening, but the weather premium that was previously over-traded is being gradually corrected.
Brazil's bumper crop outlook provides a counterbalance. As of the week ending September 4, the 2025/26 Brazilian cotton harvest reached 89.4%, 2.5 percentage points faster than the same period last year, with market production forecasts concentrated at 4.02-4.50 million tons. The high-yield pattern in the Southern Hemisphere somewhat weakens the impact of the US production decline on global supply.
Macro-level disturbances are equally significant. The expansion of Middle East conflicts pushed Brent crude above $109 per barrel, while US 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 directly pressure commodity valuations, and cotton cannot remain immune.
However, positive signals from China-US trade consultations provide a marginal buffer. On September 10, the Ministry of Commerce stated that both sides are negotiating a $30 billion reciprocal tariff reduction framework, with market expectations that the list could cover apparel, footwear, home goods, and textiles. If this framework is implemented, it would provide a substantial boost to end-demand expectations across the cotton textile supply chain.
Demand Side: Export Data Is the Most Certain Support
Amid numerous uncertainties, export data provides rare certainty. Customs data shows that August textile and apparel exports reached $28.57 billion, up 7.7% year-on-year, marking the third consecutive month of over 7% growth. This performance indicates that overseas restocking demand continues, providing bottom support for domestic spinning mill orders.
But export stability cannot fully offset weak domestic demand. 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, but end-consumer recovery remains slow. Spinning mill operating rates are stable with slight gains, new orders have improved marginally but to a limited extent, corporate profits remain under pressure, and raw material procurement is mainly need-based restocking.
The 'Financial Powerhouse Construction 15th Five-Year Plan' explicitly proposes to 'improve futures market product layout and enhance commodity price influence,' and disclosed that consumer loan interest subsidies supported approximately 1.88 trillion yuan of household consumption in the first seven months. If these policy directions are gradually implemented, they may marginally improve the financing environment and risk management capabilities of the cotton textile supply chain.