The cotton price spread between domestic and international markets widened from 1,601 to 2,100 yuan per ton in a single month — a more telling signal than the price decline itself. ICE cotton futures settled at 78.86 cents per pound by late September, down 15.3% month-on-month, while Zhengzhou cotton fell 7.2% to 15,840 yuan per ton. The overseas market dropped harder, mechanically widening the spread and restoring the comparative advantage of imported cotton. Whether downstream mills can capture that advantage, however, depends on orders rather than raw material prices.
Supply Side: Early Harvest, Reserve Sales End
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 completed its harvest, with production revised up to 4.144 million tons, up 1.5% year-on-year, and August exports reached 106,000 tons, up 37.3%. Australia lagged notably, with July exports at 127,000 tons, down 28.4% year-on-year. This divergence means short-term international supply relies more heavily on Brazilian cotton.
Domestically, reserve cotton sales ended on September 30. A total of 409,000 tons were offered, with a 99.25% transaction rate and an average price of 17,191 yuan per ton. These sales met mills' rigid demand and smoothed the transition between old and new crop years. Commercial inventory stood at 1.8097 million tons by mid-September, 634,000 tons higher than a year earlier, ensuring sufficient supply before new cotton arrives en masse. Xinjiang machine-picked cotton harvesting started about a week earlier than last year, with opening prices at 7.0-7.3 yuan per kg, slightly above the ten-year average of 6.9 yuan. Converted lint processing costs range from 16,000 to 17,000 yuan per ton, in the upper part of the normal band. Ginning factories have become notably cautious, with some large enterprises scaling back purchases and most preferring to hedge in futures while buying rather than holding unilateral spot positions.
Demand Side: Seasonal Pickup Falls Short
From January to August, national yarn output reached 14.339 million tons, up just 0.7% year-on-year, while Xinjiang yarn output jumped 17.8% to 2.57 million tons, confirming capacity migration westward. Textile and apparel domestic sales totaled 961.49 billion yuan, up 5.1%, and exports reached $203.31 billion, up 3.1%, showing overall resilience. Yet the traditional September peak season failed to deliver a clear order surge. Mill operating rates and yarn sales ratios stood at 81.9% and 96.7%, marking a second consecutive monthly recovery but still down 1.5 and 0.5 percentage points from a year earlier, and down 4.9 and 3.4 points from the first-half average. This suggests the so-called peak season is more routine restocking than genuine demand expansion.
Macro factors are mixed. Rising Fed rate expectations and long-end Treasury yields have strengthened the dollar, pressuring international cotton prices. The US-China summit produced an eight-point consensus, extending tariff relief to January next year, and China's tariff reduction list now includes US cotton. However, the US list covers only some non-cotton home textiles, excluding cotton textiles and apparel, limiting direct benefits to the cotton textile chain. Import quota constraints and high bonded inventory also mean actual US cotton intake remains uncertain.
Industry Impact and Price Outlook
Looking at both supply and demand, new cotton arrivals will significantly increase supply pressure, while downstream seasonal recovery lacks strength. The national cotton market monitoring system forecasts 2026 national cotton production at 7.46 million tons, down 290,000 tons year-on-year but still a historically high-output year, with limited减产 magnitude. Domestic cotton prices are likely to oscillate weakly around new crop costs with limited downside, while international prices face macro variables and are expected to remain range-bound. For textile enterprises, the core challenge is not price direction but procurement rhythm amid low order visibility.