At 16,673 yuan per ton, the Zhengzhou cotton futures main contract settled this week down 295 yuan from the prior week. The number itself is not dramatic, but the signal behind it deserves attention: the production-cut narrative that the market had been trading on is fading, while the supply增量 from the new harvest has yet to be fully priced in. Both bulls and bears are waiting for a clearer anchor—the opening purchase price at Xinjiang gins.
Price Signals: Domestic and International Markets Weaken in Tandem
On the domestic side, the China Cotton Price Index B averaged 18,060 yuan/ton, down 0.8% week-on-week. The international cotton index (M) landed cost equivalent was 15,879 yuan/ton, down 3.4%. The spread between domestic and international cotton thus widened to 2,181 yuan/ton, up 429 yuan from the previous week. What does a widening spread mean? For export-oriented mills, the cost advantage of imported cotton is strengthening, but the 1% tariff quota limits actual availability, leaving most factories to face elevated domestic prices.
The weakness in the international market has its own logic. The U.S. cotton good-to-excellent rating fell 5 percentage points week-on-week to 34%, with nearly 60% of producing areas affected by drought, and the drought zone still expanding. However, the USDA September supply and demand report cut 2026/27 U.S. cotton production by only 89,000 tons to 2.874 million tons—less than the market expected. Meanwhile, Brazil's harvest reached 89.4%, 2.5 percentage points ahead of last year, with production forecasts concentrated at 4.02-4.5 million tons, essentially confirming a bumper crop. The two offset each other, and the weather premium was gradually corrected. ICE cotton futures settled at 86.97 cents/lb, down 2.6% week-on-week.
Industry Transmission: Yarn Divergence and Cautious Upstream Game
The yarn market shows a stronger domestic and weaker import picture. Domestic C32S combed yarn averaged 23,708 yuan/ton, up 0.3%; imported yarn averaged 23,715 yuan/ton, essentially flat. The spread between conventional imported and domestic yarn narrowed to 7 yuan/ton, nearly erased. For buyers, this means the price advantage of imported yarn is no longer obvious; attention should shift to delivery stability and quality consistency. Polyester staple fiber rose 285 yuan/ton to 8,447 yuan/ton, strengthening the substitution effect of chemical fibers on the cost side.
The upstream game is more subtle. Xinjiang cotton boll-opening is nearly 50%, faster than last year. Surveys in Aral, Bazhou, and Aksu found no significant production cuts, with overall output expected to be flat or slightly lower year-on-year. Ginners plan to open buying around September 20, with machine-picked cotton expected at 7.0-7.6 yuan/kg, compared with only 6.3-6.4 yuan/kg last year. A price increase expectation of over 10% means enormous funding pressure and risk exposure for ginners. The memory of the 2023 "rise then fall" market is still fresh, and purchasing sentiment is generally cautious, with a low probability of panic buying.
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 slightly lower. As of September 11, central reserve cotton cumulative transactions exceeded 320,000 tons. The decline in transaction rate is not a demand collapse, but rather mills bidding rationally based on quality needs and replenishing on demand amid limited orders.
Demand Side: Export Resilience Persists, but Profit Recovery Is Slow
Downstream mill operating rates are stable with a slight increase. New orders have improved marginally but to a limited extent, and corporate profits remain under pressure. Raw material procurement is mainly just-in-time replenishment, with no large-scale stockpiling. This cautious attitude corroborates the slow recovery in terminal consumption.
Export data provides a positive signal. Customs data show that 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 partially offsets the pressure from weak domestic demand and indicates that the overseas restocking cycle is still continuing. However, it should be noted that export growth has not effectively transmitted to mill profits, with high raw material costs and exchange rate fluctuations still eroding margins.
At the macro level, there are marginal positives. China and the U.S. trade teams are negotiating a $30 billion reciprocal tariff reduction framework, and the market expects the list to potentially cover apparel, footwear, home goods, and textiles. If implemented, it would boost cotton market sentiment and export orders. Domestically, the "Financial Powerhouse Construction 15th Five-Year Plan" explicitly proposes improving futures market product layout and enhancing commodity price influence. Consumer loan interest subsidies supported about 1.88 trillion yuan of household consumption in the first seven months. If subsequent policies are gradually implemented, they may improve the financing environment and risk management for the cotton textile supply chain.