The reserve cotton auction lost its full-take rate for the first time in eight weeks, slipping to 99.35%. On the surface, the shortfall is marginal, but the signal matters far more than the statistic: mills are no longer buying indiscriminately and are now cherry-picking based on order specifications. Meanwhile, the domestic-international cotton price gap widened to 2,181 yuan/tonne, up another 429 yuan/tonne week-on-week. Taken together, these two data points reveal the true temperature of the cotton textile market better than any single-direction price move.
Spread Structure: Domestic Premium Is Being Repriced
Zhengzhou cotton futures settled at an average of 16,673 yuan/tonne, down 295 yuan/tonne or 1.7% week-on-week. The China Cotton Price Index B averaged 18,060 yuan/tonne, with losses narrowing to 0.8%. Spot prices falling less than futures suggests holders are neither panic-selling nor willing to hold firm.
Internationally, ICE cotton averaged 86.97 cents/lb, down 2.6%, while the International Cotton Index (M) landed cost fell 3.4% to 15,879 yuan/tonne. Foreign cotton fell faster, pushing the spread to 2,181 yuan/tonne. For buyers, imported cotton's cost-effectiveness is improving, but the 1% tariff quota cap prevents full capture of the spread benefit. This means the widening spread reflects weakening external pricing power rather than strengthening domestic demand.
US cotton good-to-excellent ratings fell 5 percentage points to 34%, with nearly 60% of production areas still under drought and the affected area expanding. However, the USDA September report cut US production by only 89,000 tonnes to 2.874 million tonnes, less than expected, and global ending stocks were revised upward. Weather premiums were previously over-traded and are now correcting. Brazil's harvest reached 89.4%, 2.5 percentage points ahead of last year, with production forecasts of 4.02-4.5 million tonnes, offsetting US declines. The supply-side narrative internationally offers little new.
Supply Rhythm: Opening Price vs. Reserve Auction Dynamics
Xinjiang cotton boll-opening has reached nearly 50%, faster than last year, with scattered purchasing already starting. According to on-site surveys by the national cotton market monitoring system, no significant production declines were found in Alar, Bazhou or Aksu, with overall output expected flat to slightly lower year-on-year. Ginning mills plan to open purchasing around September 20, with machine-picked cotton opening prices expected at 7.0-7.6 yuan/kg, well above last year's 6.3-6.4 yuan/kg.
This opening price expectation warrants caution. Purchasing sentiment is conservative, with ginners worried about repeating the 2023 "rise-then-fall" pattern. A high opening price means higher capital occupation costs for ginners. If downstream orders fail to keep pace, intermediate inventory pressure will concentrate after October. Reserve cotton continues to supplement supply, with cumulative sales exceeding 320,000 tonnes as of September 11 and average transaction prices edging lower. Reserve auctions and Xinjiang new crop overlap in timing, making supply-side bearish factors denser in late September.
Demand Transmission: Export Resilience Offsets Weak Domestic Demand
Mill operating rates are stable to slightly higher, with new orders improving marginally but limited in magnitude. Corporate profits remain under pressure, and raw material purchasing is mainly need-based restocking. Domestic C32S combed yarn averaged 23,708 yuan/tonne, up 0.3%, while imported yarn averaged 23,715 yuan/tonne, essentially flat. Domestic yarn outperformed imported yarn, with conventional imported yarn priced only 7 yuan/tonne above domestic. Yarn price resilience indicates mills are actively managing finished goods inventory rather than clearing through price cuts.
Export data is a rare bright spot. Customs data shows August textile and apparel exports reached $28.57 billion, up 7.7% year-on-year, maintaining above-7% growth for a third consecutive month. Sustained export stability provides some support to consumption expectations, but growth stems more from price factors and order front-loading than substantive end-consumer expansion. China-US trade teams are negotiating a $30 billion reciprocal tariff reduction framework. If the list covers apparel, footwear, home goods and textiles, it would marginally boost cotton market sentiment, though the implementation timeline remains unclear.
Macro-wise, US August core CPI rose 0.3% month-on-month, above the 0.2% expectation, pushing September Fed rate hike probability expectations to nearly 90%, pressuring commodity valuations. China's August CPI rose 0.8% year-on-year, core CPI recovered to 1.0%, and PPI expanded to 3.8%. Upstream cost transmission is strengthening, but end-consumer recovery remains slow. The "Financial Powerhouse Construction 15th Five-Year Plan" proposes improving futures market product layout and enhancing commodity pricing influence, with consumer loan interest subsidies supporting approximately 1.88 trillion yuan in residential consumption over the first seven months. Policy direction offers marginal improvement for cotton textile chain financing and risk management, but short-term supply-demand dynamics are unlikely to reverse.
Overall, international cotton prices lack upward momentum in the short term. US harvest-season supply pressure is emerging, and macro tightening expectations continue to disrupt markets, keeping a weak oscillating pattern intact. Domestically, with new crop purchasing imminent, the game between opening prices and production decline expectations will dominate the board. Reserve cotton auctions supplement supply, downstream demand improvement is limited, and Zhengzhou cotton may maintain range-bound trading in the short term.