The domestic-import cotton price spread widened from 1,601 yuan to 2,100 yuan per tonne within a single month. That number matters more than the price decline itself. A wider spread strengthens the comparative advantage of imported cotton, while the cost support for domestic cotton is being gradually diluted by expectations of new crop arrivals. For buyers, this is a window to reassess fiber blending and procurement pacing. For ginners, it is a critical month to determine whether hedging strategies can outperform spot market volatility.
Three Forces Driving Prices Lower
On the macroeconomic front, the Federal Reserve resumed rate hikes and signaled further tightening within the year, with a stronger dollar directly pressuring dollar-denominated commodities. On the industry side, harvest progress in the northern hemisphere exceeded expectations. US cotton boll-opening and harvest rates led the five-year average by 3 and 2 percentage points respectively. Brazil's harvest has fully concluded, with production forecasts revised up to 4.144 million tonnes. Domestically, traditional peak-season orders failed to gain traction. Mill operating rates and yarn sales ratios rose for a second consecutive month but remained 1.5 and 0.5 percentage points below year-ago levels, and 4.9 and 3.4 points below first-half averages.
Among these three factors, only supply-demand changes are sustainable. Macro tightening is a阶段性 disturbance, while the weak peak season points directly to underlying demand. From January to August, national yarn output reached 14.339 million tonnes, up just 0.7% year-on-year, while Xinjiang's yarn output hit 2.570 million tonnes, up 17.8%. Capacity continues to concentrate in Xinjiang, redefining the cotton cost and competitive landscape for mills in inland provinces.
Reserve Cotton Exit and New Crop Transition
As of September 29, cumulative reserve cotton sales reached 409,000 tonnes, with a 99.25% transaction rate and an average price of 17,191 yuan per tonne. Reserve sales stopped on September 30, a policy node that dovetails with the concentrated arrival of new crop. By mid-September, commercial inventories stood at 1.8097 million tonnes, 634,000 tonnes higher than the same period last year, providing relatively ample supply assurance before new cotton hits the market.
But high inventories are a double-edged sword. They smooth the supply gap during the old-to-new crop transition, but also mean channel inventories will need time to digest after new cotton arrives. Traders' and spinners' restocking willingness may be deferred. Xinjiang machine-picked cotton has been harvested about a week earlier than last year, with opening prices concentrated at 7.0-7.3 yuan per kilogram, slightly above the decade average of 6.9 yuan, implying lint processing costs of around 16,000-17,000 yuan per tonne. Ginners are hedging in futures while purchasing, and some large enterprises have even scaled back acquisition and processing volumes. This cautious posture itself signals that the industry is not optimistic about the outlook.
The Real Impact of China-US Trade Signals
The China-US leaders' meeting produced an eight-point consensus, with tariff relief extended to January next year and US cotton included in China's tariff reduction list. These signals provide short-term support for international cotton prices, but need to be dissected. The tariff relief extension directly benefits the autumn-winter export environment, a relatively certain positive for textile and apparel exporters. US cotton entering the reduction list theoretically lowers import costs, but actual incremental volumes are limited by import quota constraints and high bonded inventories. The US reduction list only covers some non-cotton home textiles, not cotton textile and apparel products, making the benefit weaker than market expectations.
This means the stabilization of China-US trade relations transmits to the cotton textile market in a structural, not comprehensive, manner. For enterprises primarily exporting cotton apparel, the improvement in order conditions may be weaker than macro signals suggest.
Outlook and Operational Logic
The large-scale arrival of new domestic cotton is a certainty, and supply pressure will increase. The national cotton market monitoring system forecasts 2026 national cotton production at 7.46 million tonnes, down 290,000 tonnes year-on-year but still a historically high-yield year. Limited production decline combined with elevated inventories suggests domestic cotton prices will likely trade weakly around new crop costs, with limited downside room supported by costs. International prices are likely to remain range-bound, influenced by Fed rate expectations and Middle East tensions.
For industry participants, the core contradiction is not price direction but cost management and procurement pacing. The widened domestic-import spread offers room for fiber blending substitution, but quota constraints and logistics cycles mean such substitution is not immediately feasible.