The pricing logic of the cotton market is undergoing a subtle shift. With China's new crop about to hit the market, the tug-of-war between opening purchase prices and fading减产 expectations has replaced weather premium trading as the dominant force on the futures board. August textile and apparel exports reached US$28.57 billion, up 7.7% year-on-year, yet this bright figure coexists with persistently squeezed spinning mill profits, painting a complex picture of supply and demand in a stalemate.
Supply Side: Fading Harvest Reduction Narrative, Reserve Sales Weigh
Zhengzhou cotton futures settled at an average of 16,673 yuan/tonne this week, down 1.7% week-on-week, while the China Cotton Price Index B averaged 18,060 yuan/tonne, a decline of 0.8%. This downturn is no accident. Xinjiang cotton boll-opening progress is nearing 50%, faster than last year, and surveys in Aral, Bazhou, and Aksu show no significant production cuts. Expectations of flat or slightly lower output are replacing the earlier supply-contraction narrative.
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成交 price edging lower. As of September 11, cumulative central reserve cotton transactions exceeded 320,000 tonnes. Spinning mills bidding rationally based on orders and replenishing on demand suggest limited acceptance of current price levels downstream. Ginning plants plan to start purchasing around September 20, with machine-picked cotton opening prices expected at 7.0-7.6 yuan/kg, significantly higher than last year's 6.3-6.4 yuan/kg. Yet purchasing sentiment remains cautious, with lingering fears of repeating the 2023 "rise then fall" pattern.
Internationally, 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, objectively reinforcing减产 expectations. However, the USDA September report cut 2026/27 U.S. cotton production by 89,000 tonnes to 2.874 million tonnes, within market expectations. Brazil's harvest rate reached 89.4%, 2.5 percentage points faster than last year, with production forecasts concentrated at 4.02-4.50 million tonnes, offsetting U.S. reductions. ICE cotton futures settled at 86.97 cents/lb, down 2.6% weekly; the International Cotton Index (M) landed cost was 15,879 yuan/tonne, down 3.4%, widening the domestic-international price gap to 2,181 yuan/tonne.
Demand Side: Strong Exports Mask Weak Domestic Demand
August textile and apparel exports grew 7.7% year-on-year, maintaining above 7% growth for the third consecutive month, providing some support to consumption expectations. Yet behind this bright figure, the stability of export orders contrasts sharply with the lagging domestic recovery. Domestic C32S combed yarn averaged 23,708 yuan/tonne, up 0.3% weekly, outperforming imported yarn; conventional imported yarn exceeded domestic yarn by only 7 yuan/tonne, with the price gap nearly erased.
Spinning mill operating rates rose steadily, with new orders improving slightly but marginally, while corporate profits remained under pressure. Raw material procurement focused on just-in-time replenishment. This means mills lack the willingness to chase cotton prices higher. Once new crop purchase prices open high, whether downstream can smoothly pass through costs will be a key variable. Polyester staple fiber prices rose 285 yuan/tonne to 8,447 yuan/tonne, and the substitution effect of chemical fibers for cotton may further emerge if cotton prices stay elevated.
Macro-wise, Middle East conflicts pushed Brent crude above US$109/barrel. U.S. August core CPI rose 0.3% month-on-month, above expectations, lifting the probability of a September Fed rate hike to nearly 90%, pressuring commodity valuations. China-U.S. trade teams are negotiating a US$30 billion reciprocal tariff reduction framework. If the tariff list covers apparel, footwear, home goods, and textiles, it would provide marginal support to cotton market sentiment. Domestically, the "Financial Powerhouse Construction 15th Five-Year Plan" was released, explicitly aiming to improve futures market product layout and enhance commodity pricing influence. Consumer loan interest subsidies supported about 1.88 trillion yuan of household consumption in the first seven months, and policy directions may improve financing conditions and terminal consumption expectations for the cotton textile chain.
Outlook: Structural Opportunities Amid Range-Bound Trading
Short-term international cotton prices lack upward momentum. With U.S. cotton harvest supply pressure emerging and macro tightening expectations, a weak range-bound pattern is expected to continue. Domestically, with the new crop about to open, the game between purchase prices and production reduction expectations will dominate the board. Continuous reserve sales supplement supply, downstream demand improvement is limited, and Zhengzhou cotton may maintain range-bound trading.
For the industrial chain, the core contradiction lies not in absolute price levels but in whether cost transmission is smooth. If opening prices are as high as expected, ginning plants face the risk of inverted purchase costs and sales prices. Mills must balance rising raw material costs against weak bargaining power on orders. Export growth above 7% provides a demand safety cushion, but structural divergence is evident—home textiles and apparel benefit from China-U.S. tariff reduction expectations, while conventional yarn varieties face fierce competition and squeezed profit margins.