China's cotton market is about to lose a key marginal supply source. China Reserve Cotton Management Co. has confirmed that 2026 central reserve cotton sales will stop from September 30. That date is slightly earlier than some traders had expected for mid-October, meaning mills will face a one-to-two-week "policy supply vacuum" before the new crop arrives in volume.
Background
Reserve cotton auctions have long served as a flexible tool to balance domestic supply and demand. When market liquidity is tight and the domestic-international price spread widens, auctions can supplement lower-grade cotton and cool spot prices. The decision to halt sales is not because demand has vanished, but because the new crop is about to be harvested. Continuing auctions could depress new-crop purchase prices.
From the industrial belts, ginning plants in Shandong, Hebei and Xinjiang have begun buying, with purchase prices slightly higher year on year. The timing of the halt avoids old and new cotton competing directly and leaves room for new-crop pricing. For downstream mills, the raw material strategy must shift from auction dependence to locking in new cotton.
Industry Impact
The most direct change is on the supply side. With reserve sales ending, mills lose a cost-effective raw material channel. Low-count yarn, air-jet spinning and other categories that rely heavily on reserve cotton will feel cost pressure first. If new-crop arrivals are delayed by weather, some small and medium mills could face short-term supply gaps.
On pricing, the end of reserve sales is typically read as a bullish signal. Historical experience shows domestic spot cotton prices can rise 1%-3% in the month after auctions end, though the magnitude depends on new-crop quality and arrival speed. Xinjiang's crop is in good condition this year, and machine-picked cotton continues to gain share. If harvesting proceeds smoothly, upside may be limited.
For exporters, the domestic-international price spread is the core variable. If domestic prices rise quickly after the halt while international prices remain capped by ample global supply, the spread could widen again, weakening the price competitiveness of Chinese cotton products. This is especially sensitive for low-count yarn and grey fabric exports.