Zhengzhou cotton futures settled at 16,673 yuan per ton this week, down 295 yuan or 1.7% from the prior week. Behind that number lies a rapid correction of Xinjiang harvest-cut expectations. As weather premiums are squeezed out, cotton pricing power is shifting from weather narratives back to supply-demand fundamentals. For textile enterprises, the real test is not board volatility but whether the upcoming ginning price can be absorbed by downstream orders.
Price Signals: Domestic and International Pressure
Domestically, the China Cotton Price Index B averaged 18,060 yuan/ton, down 0.8% week-on-week. The approaching new crop and continued reserve cotton sales create dual supply pressure, while peak-season orders fall short of expectations, leaving demand support clearly insufficient. The strong-supply, weak-demand pattern is reflected directly in the futures market.
Internationally, ICE cotton futures settled at 86.97 cents/lb, down 2.6%. The International Cotton Index (M) landed cost fell 3.4% to 15,879 yuan/ton. The sharper decline in imported cotton costs widened the domestic-import spread to 2,181 yuan/ton, up 429 yuan from the prior week. What does this mean? For export-oriented spinners, imported cotton's cost-effectiveness is recovering, creating a window for procurement strategy adjustment.
Yarn markets show domestic strength versus foreign weakness. Domestic C32S carded yarn averaged 23,708 yuan/ton, up 0.3%, while imported yarn of the same specification averaged 23,715 yuan/ton, essentially flat. The premium of regular imported yarn over domestic yarn is just 7 yuan/ton, nearly negligible. Polyester staple fiber rose 285 yuan to 8,447 yuan/ton, and the substitution effect of chemical fibers over cotton deserves continued tracking.
New Crop Pricing: Cost Pressure in the 7-Yuan Era
Xinjiang cotton boll-opening progress has reached nearly 50%, faster than last year, with scattered purchasing already starting in some areas. According to on-site surveys by the national cotton market monitoring system, no significant production cuts have appeared in Alar, Bazhou, or Aksu, and overall output is expected to be flat or slightly lower year-on-year. This means the production-cut logic that the market over-traded is being disproven.
Ginning mills plan to start 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. A year-on-year increase exceeding 10% means higher capital occupation and greater price risk for ginners. Purchasing sentiment is cautious, and the industry widely fears a repeat of the 2023 "rise then fall" pattern.
On the international supply side, the USDA September report cut 2026/27 U.S. cotton production by 89,000 tons to 2.874 million tons, but the reduction did not exceed market expectations and provided no new bullish impetus. The U.S. good-to-excellent rating fell 5 percentage points week-on-week to 34%, with nearly 60% of producing areas still affected by drought. Production-cut expectations are objectively still strengthening, but marginal momentum has clearly weakened. Meanwhile, Brazil's cotton harvest rate reached 89.4%, 2.5 percentage points faster than last year, with production forecasts concentrated at 4.02-4.5 million tons. The bumper crop may partially offset U.S. production cuts.
Demand shows marginal improvement. For the week ending September 3, U.S. upland cotton net export commitments reached 16,800 tons, 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, maintaining above-7% growth for a third consecutive month. Spinning mill operating rates are stable with slight increases, and new orders have improved modestly but remain limited. Corporate profits stay under pressure, with raw material procurement mainly based on immediate needs.
Reserve cotton sales entered their eighth week, with the transaction rate failing to reach full for the first time, dropping to 99.35%, while the average transaction price fell slightly week-on-week. As of September 11, cumulative central reserve cotton transactions exceeded 320,000 tons. The decline in transaction rate is a noteworthy signal — spinning mills are becoming more rational in bidding, purchasing based on orders and quality needs rather than chasing highs.
Macro Variables: Tax Cut Expectations Meet Tightening Disturbances
China and the U.S. are negotiating a $30 billion reciprocal tariff reduction framework, with market expectations that the list may cover apparel, footwear, home goods, and textiles. If implemented, this would provide a substantial boost to end-user demand across the cotton textile chain. However, this expectation remains at the sentiment level and has not yet translated into orders.
On the other hand, rising Fed rate hike expectations are weighing on commodity valuations. U.S. August core CPI rose 0.3% month-on-month, above expectations, pushing market-implied probability of a September hike to nearly 90%. Tightening financial conditions cap cotton price upside.
Domestic policy releases marginal positives. The "Financial Powerhouse Construction 15th Five-Year Plan" explicitly proposes improving futures market product layout and enhancing commodity pricing influence. Consumer loan interest subsidies supported about 1.88 trillion yuan of household consumption in the first seven months. If subsequent policies gradually land, they may improve financing conditions and end-consumer expectations across the cotton textile chain.