The spread between domestic and international cotton prices widened from 1,601 to 2,100 yuan per tonne within a single month. That number deserves more attention than any one-way price move. In September, three forces converged: the US Federal Reserve restarted rate hikes, expectations of a Northern Hemisphere production shortfall were revised upward, and China's textile peak season underperformed. International prices fell harder than domestic ones. The international cotton M index, reflecting landed prices at Chinese main ports, settled at 92.39 cents per pound, down 8.4% from end-August, equivalent to an import cost of 15,215 yuan per tonne. The domestic B index, tracking standard-grade lint in inland markets, stood at 17,315 yuan per tonne, down only 4.9%. The widening spread means imported cotton's comparative advantage is accumulating fast, but whether it translates into actual purchases depends on quota availability and bonded warehouse stocks.
Supply Side: New Crop Arrives Early, Ginning Sentiment Shifts
The Northern Hemisphere harvest is running ahead of schedule. US cotton boll-opening and harvesting rates led the five-year average by 3 and 2 percentage points respectively. Brazil's harvest has fully wrapped up, with production revised up to 4.144 million tonnes. In Xinjiang, machine-picked cotton arrived about a week earlier than last year, with opening prices concentrated at 7.0-7.3 yuan per kilogram, slightly above the ten-year average of 6.9 yuan. This translates to a lint processing cost of 16,000-17,000 yuan per tonne, at the upper end of the normal range.
What truly matters is how ginning factories have changed their purchasing behavior. The usual scramble that drives prices higher has not materialized. Some large enterprises have scaled back ginning operations, while most prefer to hedge in the futures market while purchasing, avoiding outright long positions. This caution is itself a price signal: the industry lacks confidence in the post-harvest market.
The September crop survey by the national cotton market monitoring system projects China's 2026 cotton output at 7.46 million tonnes, down 290,000 tonnes year-on-year but still a historically high level. Earlier concerns about reduced planting area and heat damage in Xinjiang are being revised upward as harvesting progresses. After the National Day holiday, concentrated new-crop arrivals will significantly increase supply pressure—the most direct near-term drag on domestic prices.
Demand Side: Peak Season Warms but Lacks Substance
From January to August, national yarn output reached 14.339 million tonnes, up just 0.7% year-on-year. Yet Xinjiang's yarn output hit 2.57 million tonnes, up 17.8%. This reveals a structural shift: cotton spinning capacity is steadily migrating to Xinjiang. For inland mills, the competitive pressure is not just about demand—it is also about being squeezed by lower-cost Xinjiang capacity. Even if peak-season orders recover, profit margins for small and medium inland mills could compress further.
Domestic textile and apparel retail sales reached 961.49 billion yuan, up 5.1%, while exports totaled 203.31 billion US dollars, up 3.1%. Both domestic and external demand show resilience. But in September, spinning mill operating rates stood at 81.9% and yarn sales-to-production ratios at 96.7%. Though both rose for a second consecutive month, they were down 1.5 and 0.5 percentage points year-on-year, and down 4.9 and 3.4 percentage points from first-half averages. Autumn-winter and holiday orders are indeed being placed, and mills are stocking up, but order volumes have not surged meaningfully. The peak season is weaker than both last year and the first half.
Reserve cotton sales ended on September 30, with cumulative offerings of 409,000 tonnes and a 99.25% clearance rate at an average price of 17,191 yuan per tonne. These sales effectively supplemented market supply, met rigid demand from spinning mills, and provided a buffer for the transition to the new Xinjiang crop year. As of mid-September, commercial inventories stood at 1.8097 million tonnes, 634,000 tonnes higher than a year earlier. Supply is secured before concentrated new-crop arrivals. But high commercial stocks also mean de-stocking pressure after the new crop lands will not be small.
Macro Variables: Benefits Are Structural
At the end of September, the US-China summit in Washington produced an eight-point consensus, stabilizing bilateral relations in the short term. For the cotton textile market, the tariff exemption extension to January benefits autumn-winter export conditions, and China's tariff reduction list including US cotton will lower import costs. However, the US reduction list covers only some non-cotton home textiles, not cotton textile and apparel products—less favorable than expected. Combined with quota constraints and high bonded stocks, actual US cotton inflows remain to be seen.
Overall, domestic cotton prices are likely to trade weakly around new-crop costs, with limited downside. International prices will likely remain range-bound amid Fed rate expectations and Middle East tensions. For all links in the supply chain, the core task now is not predicting direction but managing inventory and purchasing节奏.