Domestic cotton prices now exceed international levels by 2,181 yuan/ton, with the spread widening by 429 yuan/ton week-on-week. That divergence matters more than any single price move: it signals that imported cotton is becoming increasingly competitive, while domestic ginners and spinners face higher raw material costs.
Price and Spread: Divergence Widens
According to China Customs and industry public data, the Zhengzhou cotton futures main contract settled at an average of 16,673 yuan/ton this week, down 295 yuan/ton or 1.7% from the previous week. The China Cotton Price Index B, representing standard-grade lint in the domestic market, averaged 18,060 yuan/ton, down 137 yuan/ton or 0.8%. Internationally, the New York cotton futures main contract averaged 86.97 cents/lb, down 2.31 cents/lb or 2.6%, while the International Cotton Index (M) averaged 96.42 cents/lb, equivalent to an import cost of 15,879 yuan/ton, down 566 yuan/ton or 3.4%.
Both markets weakened, but the international decline was steeper, further widening the spread. For buyers, imported cotton's cost advantage is growing, though quotas and shipping schedules remain constraints. For domestic ginners, high opening prices mean hedging pressure is deferred; if the futures discount widens, acquisition risk will accumulate rapidly.
Supply Side: New Crop and Reserve Sales
Xinjiang cotton boll-opening progress is ahead of last year, with scattered buying already starting in some areas. According to field research 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. Ginners plan to open buying around September 20, with machine-picked cotton expected at 7.0-7.6 yuan/kg, well above last year's 6.3-6.4 yuan/kg. Buying sentiment is cautious, with concerns about repeating the 2023 "rise then fall" pattern.
Reserve cotton sales entered their eighth week, with the clearance rate failing to reach full for the first time, dropping to 99.35%. The average transaction price fell slightly, as spinners bid rationally based on orders and quality needs, replenishing on demand. As of September 11, cumulative central reserve cotton sales exceeded 320,000 tons. Supply-side bearish factors are strengthening, but high opening prices provide cost support. The focus of the long-short game is shifting from "production cut expectations" to "actual acquisition prices."
Internationally, the USDA September supply and demand report cut 2026/27 U.S. cotton production by 89,000 tons to 2.874 million tons, within market expectations. Brazil's cotton harvest is wrapping up; as of the week ending September 4, the 2025/26 harvest rate was 89.4%, 2.5 percentage points ahead of last year. Market forecasts for Brazil's output cluster around 4.02-4.5 million tons, likely sustaining a high-yield pattern that could offset some of the U.S. production cut.
Demand Side: Export Resilience Offsets Weak Domestic Demand
Downstream spinning mills are running at stable-to-slightly-higher operating rates. New orders have improved marginally but remain limited, profits are under persistent pressure, and raw material purchases are mainly just-in-time replenishment. Domestic C32S combed yarn averaged 23,708 yuan/ton, up 64 yuan/ton or 0.3% from the previous week. Imported C32S combed yarn from major sources averaged 23,715 yuan/ton, down 8 yuan/ton, roughly flat. Conventional imported yarn is 7 yuan/ton above domestic yarn. Polyester staple fiber rose 285 yuan/ton to 8,447 yuan/ton, and the substitution effect of chemical fibers continues to ferment.
Exports remain stable. China Customs data show August textile and apparel exports reached $28.57 billion, up 7.7% year-on-year, the third consecutive month above 7% growth, providing some support to consumption expectations. Export resilience mainly comes from the ongoing restocking cycle in the U.S. and Europe, as well as re-export trade after some orders shifted to Southeast Asia. However, if Federal Reserve rate hike expectations intensify and geopolitical disruptions push up ocean freight rates, export profits could be further squeezed.
Macro-wise, U.S. core CPI rose 0.3% month-on-month in August, above the expected 0.2% and the largest monthly gain in four months. After the data, market expectations for a September Fed rate hike rose to nearly 90%. Financial conditions tightened, pressuring commodity valuations. On China-U.S. trade talks, the Ministry of Commerce said on September 10 that the two sides are negotiating a $30 billion reciprocal tariff reduction framework, with market expectations that the list could cover apparel, footwear, home goods, and textiles, providing some support to cotton market sentiment.
Outlook and Practical Recommendations
In summary, the USDA September report provided no new bullish catalyst. Short-term international cotton lacks upward momentum, and with U.S. harvest supply pressure emerging and macro tightening expectations, international cotton is likely to remain range-bound to weak. Domestically, with the new crop opening imminent, the game between acquisition prices and production cut expectations will dominate the market. Reserve cotton sales continue to supplement supply, while downstream demand improvement is limited. Zhengzhou cotton may stay range-bound in the short term. Focus on opening price outcomes and actual peak-season order changes, while watching for external shocks from Fed rate hikes and geopolitical risks.