At 15,838 yuan per ton, the settlement average of Zhengzhou cotton futures in the final week of September marked a 176 yuan drop from the prior week. A 1.1% weekly decline is hardly dramatic on its own, but the significance lies in the fact that this was the first sign of stabilization after weeks of sustained weakness. The China Cotton Price Index B, representing standard grade lint in the domestic market, stood at 17,378 yuan per ton, down 1.3% week-on-week. The price curve is shifting from a one-way decline to range-bound consolidation — a pattern change that often reveals more about market psychology than absolute price levels.
Price Signals: Domestic and International Convergence
The domestic price floor is being shaped by new crop procurement. Cotton boll opening in Xinjiang has exceeded 80%, with weather conditions generally favorable for picking. Scattered buying has begun, and machine-picked seed cotton prices have stabilized at 7.0-7.3 yuan per kilogram after falling. Zhengzhou cotton futures are now hovering near the lower bound of the cost range, which means hedging space for ginners has been significantly compressed and the safety margin for further short-selling is narrowing.
Internationally, the ICE cotton futures settlement average was 83.12 cents per pound, down 0.3% weekly. The International Cotton Index (M), reflecting landed prices at Chinese main ports, stood at 92.12 cents per pound, equivalent to 15,171 yuan per ton at 1% tariff, down 1.8%. The domestic price premium over international cotton widened by 49 yuan to 2,207 yuan per ton. This widening spread enhances the comparative advantage of imported cotton, opening a procurement window for mills using imported fiber.
The yarn market weakened in tandem. Domestic C32S carded yarn averaged 23,650 yuan per ton, down 0.2%, while imported yarn of the same specification from major sources averaged 23,520 yuan per ton, down 0.4%. Conventional imported yarn traded 130 yuan below domestic yarn. Polyester staple fiber fell 213 yuan to 8,671 yuan per ton, further eroding the substitute support for cotton.
Policy Variables: Tariff Consensus and Reserve Sales Suspension
The China-US high-level interactions from September 23 to 25 produced an eight-point consensus, including a $30 billion reciprocal tariff reduction arrangement and the advancement of a trade council mechanism. For the cotton textile sector, the substantive implication lies in the potential improvement of the export environment. However, there is a time lag between consensus and implementation details, and market sentiment remains cautious before concrete measures materialize. The probability of another Federal Reserve rate hike this year has risen to about 67%, with 5-year and 10-year Treasury yields breaking above 5%, continuing to suppress commodity valuations.
Domestic policy has released clearer medium-to-long-term signals. On September 22, the Ministry of Industry and Information Technology and other departments issued the 15th Five-Year Plan for the Light and Textile Industry, targeting revenues of over 30 trillion yuan for above-scale enterprises by 2030, with tasks focused on innovation capacity, supply-demand alignment, and intelligent green transformation. The plan's impact on the cotton textile chain is not in short-term prices but in the direction of demand structure optimization.
A key turning point emerged in reserve cotton policy. As of September 24, cumulative reserve sales exceeded 398,000 tons, with a weekly transaction rate of 99.90%, up 6.83 percentage points from the prior week. The average transaction price was 16,607.55 yuan per ton, down 208.46 yuan. On September 25, China National Cotton Reserve Corporation announced the suspension of 2026 central reserve cotton sales from September 30. The suspension removes an important marginal supply source, providing sentiment support, though actual impact depends on new crop arrival pace and downstream absorption capacity.
Supply-Demand Dynamics: Production Risks vs. Harvest Reality
US cotton export commitments rebounded significantly. For the week ending September 17, 2026/27 US upland cotton net export sales reached 52,300 tons, more than tripling from the prior week, while shipments rose 16% to 37,400 tons. However, cumulative commitments remain below the five-year average, and demand sustainability is uncertain. On the supply side, the US cotton good-to-excellent rating fell 2 percentage points to 34%, trailing last year by 13 percentage points. The Texas main producing region saw a rating of just 18% amid severe drought. Yet the national harvest pace reached 13%, 2 percentage points ahead of the five-year average, limiting production threat.
Brazilian cotton continues to exert competitive pressure. Brazil exported 106,000 tons in August, up 37.3% year-on-year. As of September 18, the 2025/26 Brazilian harvest exceeded 98%, with new crop arrivals imminent. Global free supply is loosening marginally, weighing on international prices.
Domestic procurement sentiment has diverged. Some ginners have secured funding and maintain reasonable confidence, while some individual ginneries face financing constraints and are turning cautious. The industry expects an increase in quick-turnaround operations, meaning ginners prefer rapid inventory turnover over stockpiling for price gains. Yarn sales are generally stable with localized volume declines. Mills maintain firm pricing intentions, but downstream absorption is weak and stockpiling willingness is low.
In the near term, accelerated new crop arrivals remain the core suppressor, and with insufficient sustained demand, domestic and international cotton prices are expected to stay range-bound. The reserve sales suspension and the China-US eight-point consensus may bring sentiment repair, but the rebound height depends on tariff details, new orders, and production expectation fluctuations.