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 expectation correction behind it deserves scrutiny: the production-cut premium the market had been trading is being systematically squeezed out, and the window for new crop arrivals has opened.
Price Signals: Domestic and International Markets Weaken in Tandem, Yet Spread Widens
Domestically, the China Cotton Price Index B, representing standard-grade lint in the interior, averaged 18,060 yuan/ton, down 0.8% week-on-week. The international reference was similarly soft, with ICE cotton futures settling at an average of 86.97 cents/lb, down 2.6%. The International Cotton Index (M), reflecting landed prices at Chinese main ports, translated to an import cost of about 15,879 yuan/ton, a drop of 3.4%.
One detail easily overlooked: the premium of domestic cotton over international cotton widened to 2,181 yuan/ton, an increase of 429 yuan from the previous week. This means the comparative advantage of imported cotton is strengthening. For mills reliant on imported raw materials, a wider spread alters blending strategies—when the gap breaches the 2,000-yuan threshold, the incentive to increase the proportion of imported cotton rises markedly.
Within the textile market, divergence is evident. Domestic C32S combed yarn averaged 23,708 yuan/ton, up 0.3%. The same specification from major import sources averaged 23,715 yuan/ton, essentially flat, with conventional imported yarn commanding a premium of just 7 yuan/ton over domestic yarn—the price advantage of imported yarn has all but vanished. Polyester staple fiber, by contrast, rose 285 yuan/ton to 8,447 yuan/ton, reflecting the ongoing substitution effect of chemical fibers for cotton.
Supply-Demand Dynamics: Ample Crop Expectations Offset U.S. Production Cuts, Demand Recovery Lags
The international supply narrative is shifting. 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 affected range expanding. Yet the USDA's September supply and demand report cut 2026/27 U.S. cotton production by only 89,000 tons to 2.874 million tons, a adjustment that fell short of market expectations, triggering profit-taking by longs. Meanwhile, Brazil's harvest rate reached 89.4%, 2.5 percentage points ahead of the same period last year, with market production forecasts concentrated between 4.02 and 4.5 million tons. The continuation of a high-yield pattern is expected to offset U.S. production cuts.
Marginal improvement is appearing on the demand side. As of the week ending September 3, U.S. upland cotton net export commitments totaled 16,800 tons, up 10,600 tons from the prior week. Whether this improvement can be sustained depends on the purchasing pace of Chinese buyers—and the reality in China's downstream sector is that mill operating rates are stable with slight gains, new orders have improved marginally but to a limited extent, corporate profits remain under pressure, and raw material procurement is primarily need-based restocking.
Regarding China's new crop, Xinjiang cotton boll-opening has reached nearly 50%, faster than the same period last year, with scattered purchasing already beginning in some areas. According to field research by the national cotton market monitoring system, no significant production declines have occurred in Alar, Bayingolin, or Aksu, and overall output is expected to be flat or slightly lower year-on-year. Ginning factories plan to begin purchasing around September 20, with machine-picked cotton opening prices expected at 7.0 to 7.6 yuan/kg, significantly higher than last year's 6.3 to 6.4 yuan/kg.
This opening price expectation is the biggest bargaining point in the current market. A high opening price means higher costs for ginners, but whether downstream can accept corresponding yarn price increases remains unknown. Ginners' concerns about a repeat of the 2023 "rise then fall" pattern are not unfounded—that year's high opening price ultimately failed to transmit to end users, instead pushing processing enterprises into losses.
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, central reserve cotton cumulative transactions exceeded 320,000 tons. The decline in the transaction rate is itself a signal: after comparing reserve cotton with spot prices, mills are becoming more rational in bidding, restocking according to orders and quality needs rather than panic buying.
Export data provides some support. Customs data show 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 growth boosts consumption expectations, but it should be noted that export growth coexists with weak domestic demand, indicating an uneven recovery in end-user consumption.
At the macro level, Middle East conflicts pushed Brent crude above $109/barrel, U.S. August core CPI rose 0.3% month-on-month, above expectations, and market expectations for a September Fed rate hike climbed to nearly 90%, pressuring commodity valuations broadly. China-U.S. trade teams are negotiating a $30 billion reciprocal tariff reduction framework, with the tariff reduction list likely covering apparel, footwear, home goods, and textiles. If implemented, this would boost cotton market sentiment.