At 16,673 yuan per ton, the benchmark settlement price for Zhengzhou cotton futures fell 1.7% week-on-week. Behind this figure lies a tug-of-war among three forces: expectations of the incoming new crop, continuous reserve cotton sales, and lackluster downstream orders. Market sentiment is retreating from weather-premium exuberance toward a sober assessment of supply-demand fundamentals.
Supply Side: New Crop and Reserve Sales Exert Dual Pressure
The domestic new cotton season is on the horizon. Xinjiang cotton boll-opening progress has reached nearly 50%, faster than last year, with scattered purchasing already starting in some areas. According to field surveys by the national cotton market monitoring system, no significant production declines have been observed in Alar, Bazhou, or Aksu, with overall output expected to be flat or slightly lower year-on-year. Ginning mills plan to begin purchasing around September 20, with machine-picked cotton opening prices expected at 7.0-7.6 yuan/kg, notably above last year's 6.3-6.4 yuan/kg.
Yet purchasing sentiment remains cautious. Ginning mills worry about repeating the 2023 "rise-then-fall" pattern and are bidding conservatively. Meanwhile, reserve cotton sales entered their eighth week, with the transaction rate failing to reach full subscription for the first time, dropping to 99.35%, while the average transaction price edged lower. As of September 11, cumulative central reserve cotton transactions exceeded 320,000 tons. Continuous reserve sales combined with imminent new crop arrivals are accumulating bearish supply-side factors.
International supply also fails to support prices. The USDA's September supply-demand report cut 2026/27 U.S. cotton production by 89,000 tons to 2.874 million tons, but the adjustment fell short of market expectations, triggering long liquidation. Brazil's cotton harvest is wrapping up, with 89.4% completed as of the week ending September 4, 2.5 percentage points ahead of last year. Market forecasts for Brazilian output cluster around 4.02-4.5 million tons, with another high-yield season expected, offsetting U.S. production losses.
Demand Side: Strong Exports Mask Weak Domestic Consumption
In contrast to supply-side pressure, demand presents a "hot outside, cold inside" divergence. Customs data show August textile and apparel exports reached $28.57 billion, up 7.7% year-on-year, maintaining above-7% growth for a third consecutive month. This data offers some support to consumption expectations, indicating overseas restocking demand is still releasing.
However, domestic downstream performance lags notably. Spinning mill operating rates are stable with slight gains, new orders improved marginally but limitedly, corporate profits remain under pressure, and raw material procurement is primarily need-based. Domestic C32S combed yarn averaged 23,708 yuan/ton, up 64 yuan/ton or just 0.3% week-on-week; imported C32S from major sources averaged 23,715 yuan/ton, essentially flat. Domestic yarn slightly outperforms imported yarn, but overall demand-side support for cotton prices remains limited.
Macro-level, Middle East conflicts pushed Brent crude above $109/barrel, heating up inflation expectations; U.S. August core CPI rose 0.3% month-on-month, above expectations, raising market expectations for a September Fed rate hike to nearly 90%. Tightening financial conditions weigh on commodity valuations. However, China-U.S. trade teams are negotiating a $30 billion reciprocal tariff reduction framework, with the reduction list likely covering apparel, footwear, home goods, and textiles, offering marginal buffer to cotton market sentiment.
Outlook: Range-Bound Trading Awaits Directional Breakout
Short-term, international cotton prices lack upward momentum. The USDA report provided no new bullish factors, U.S. cotton harvest-season supply pressure is emerging, and macro tightening expectations add disturbance. International cotton prices are expected to remain range-bound with a weak bias. New York cotton futures settled at 86.97 cents/lb, down 2.6% week-on-week; the International Cotton Index (M) averaged 96.42 cents/lb, with import costs at 15,879 yuan/ton (1% tariff, excluding port charges and freight), down 3.4%. Domestic prices exceed international by 2,181 yuan/ton, with the spread widening 429 yuan/ton week-on-week, pressuring imported yarn competitiveness.
Domestically, with new crop purchasing imminent, the game between opening prices and production-cut expectations will dominate the market. Continuous reserve sales supplement supply, downstream demand improvement is limited, and Zhengzhou cotton may remain range-bound short-term. Key focuses include opening price outcomes and actual peak-season order changes, while guarding against external disturbances from Fed rate hikes and geopolitical shifts.