China's cotton market is undergoing a classic "expectation correction." The Zhengzhou Commodity Exchange cotton main contract settled at an average of 16,673 yuan/tonne for the week, down 295 yuan or 1.7% from the previous week, while the China Cotton Price Index B averaged 18,060 yuan/tonne, down 137 yuan. Meanwhile, the international cotton index (M) landed cost stood at just 15,879 yuan/tonne, widening the domestic-international spread to 2,181 yuan. This widening spread means imported cotton's comparative advantage is strengthening, quietly opening up raw material options for export-oriented spinners.
Supply Side: New Crop and Reserve Sales Create Dual Pressure
Xinjiang's cotton boll-opening progress has reached nearly 50%, faster than last year, with scattered purchasing already starting in some areas. Field surveys by the national cotton market monitoring system show no significant production cuts in Alar, Bayingolin, or Aksu, with overall output expected to be flat or slightly lower year-on-year. Ginning factories plan to start purchasing around September 20, with machine-picked cotton opening prices expected at 7.0-7.6 yuan/kg, sharply higher than last year's 6.3-6.4 yuan/kg.
Behind this price expectation lies cautious purchasing sentiment. Ginners vividly remember the 2023 "rise then fall" pattern and dare not chase prices aggressively. 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%, and the average price edging lower. Spinners are bidding rationally based on orders and quality needs. As of September 11, cumulative central reserve cotton transactions exceeded 320,000 tonnes. Multiple supply sources—new crop, reserves, and imports—are converging to cap upside potential.
Internationally, the USDA's September supply and demand report cut 2026/27 U.S. cotton production by 89,000 tonnes to 2.874 million tonnes, but this adjustment did not exceed 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 producing areas still affected by drought, and the drought range expanding from the previous week. Production cut expectations objectively exist, but the previously over-traded weather premium is being gradually corrected, with marginal momentum clearly fading. Brazil's cotton harvest is entering its final stage, with the harvest rate reaching 89.4% as of the week of September 4, 2.5 percentage points faster than last year. Market forecasts for its production are concentrated at 4.02-4.50 million tonnes, and a bumper crop is expected to continue, offsetting U.S. production cuts.
Demand Side: Export Resilience Persists, Domestic Recovery Slow
Downstream spinning mills' operating rates are stable with slight increases, new orders have improved marginally but to a limited extent, corporate profits remain under pressure, and raw material procurement is mainly based on just-in-time restocking. Domestic C32S combed yarn averaged 23,708 yuan/tonne, up 64 yuan week-on-week; imported C32S combed yarn from major sources averaged 23,715 yuan/tonne, essentially flat, with conventional imported yarn 7 yuan higher than domestic yarn. Domestic yarn outperforming imported yarn reflects a slight cost transmission advantage for domestic spinners, but whether this advantage can persist depends on subsequent substantial order growth.
Export data provides some support. Customs data shows 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 resilience partly stems from positive signals in China-U.S. trade consultations—the two sides are negotiating a $30 billion reciprocal tariff reduction framework, and the market expects the tariff reduction list may cover clothing, footwear, home goods, textiles, and other consumer products. If tariffs are reduced, it would provide marginal support to cotton market sentiment.
However, macroeconomic disturbances cannot be ignored. Expanding 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 the expected 0.2%, and market expectations for a September Fed rate hike rose to nearly 90%. Financial conditions are tightening, and commodity valuations are under pressure. China's August CPI rose 0.8% year-on-year, core CPI rebounded to 1.0%, and PPI growth expanded to 3.8%, strengthening upstream cost transmission, but terminal consumption recovery remains slow. The "Financial Powerhouse Construction 15th Five-Year Plan" proposes improving futures market product layout, with consumer loan interest subsidies supporting approximately 1.88 trillion yuan in residential consumption in the first seven months. If policies gradually land, they may marginally improve financing conditions and terminal consumption expectations for the cotton textile supply chain.
Market Outlook: Range-Bound Trading, Focus on Opening Prices and Orders
In summary, the USDA report failed to provide new bullish factors, U.S. cotton harvest-season supply pressure is emerging, and macroeconomic tightening expectations are disturbing the market. International cotton prices may continue a weak, range-bound pattern in the short term. Domestically, with the new crop about to start purchasing, the game between purchase prices and production cut expectations will dominate the market. Continued reserve cotton sales supplement supply, downstream demand improvement is limited, and Zhengzhou cotton may maintain range-bound trading in the short term.
For market participants, two core variables stand out: the actual landing of opening purchase prices and substantive changes in peak-season orders. If opening prices start high and trend lower, hedging pressure on ginners and traders will rise rapidly; if orders continue to disappoint, spinners' raw material restocking pace will further slow.