The internal-external cotton price spread widened to 2,100 yuan/ton by late September, up from 1,601 yuan/ton a month earlier. That number matters more than any single price move — it determines whether the import window is open and reflects pricing anxiety before China's new crop hits the market. ICE cotton futures settled at 78.86 cents/lb, down 15.3% month-on-month, while Zhengzhou cotton fell 7.2% to 15,840 yuan/ton. Both markets declined, but the overseas drop was sharper, mechanically widening the spread.
Global Balance: Wider Gap, Recovering Supply
The USDA's September forecast paints a tight picture: 2026/27 global production at 25.54 million tons, down 3.8% year-on-year; consumption at 26.76 million tons, up 1.5%; a supply-demand gap of 1.22 million tons, 1.4 million tons wider than a year ago; and a stock-to-use ratio of 57%, historically low. This tightness provides a floor, but Northern Hemisphere harvests are repairing earlier减产 expectations.
U.S. cotton boll-opening and harvest rates reached 70% and 17%, both ahead of five-year averages. Brazil's harvest is complete, with production revised up to 4.144 million tons, up 1.5%; August exports rose 37.3% year-on-year to 106,000 tons. Australia's July exports fell 28.4% to 127,000 tons. New-crop U.S. export commitments reached 981,000 tons, above last year but well below the five-year average. Supply is improving, but export demand is not keeping pace, capping upside for international prices.
Domestic Supply: Reserves Exit, New Crop Arrives Early
As of September 29, cumulative reserve cotton sales reached 409,000 tons with a 99.25% clearance rate, averaging 17,191 yuan/ton, or 17,851 yuan/ton on a 3128B basis. Sales stopped on September 30, a policy move that stabilized expectations and bridged the old and new crop years. Commercial inventory stood at 1.8097 million tons in mid-September, 634,000 tons above last year, ensuring adequate supply before the new crop floods in.
Xinjiang machine-picked cotton is being harvested about a week earlier than last year. Opening prices cluster at 7.0-7.3 yuan/kg, slightly above the ten-year average of 6.9 yuan/kg, translating to lint processing costs of 16,000-17,000 yuan/ton — the upper end of the normal range. Ginners are notably cautious, with some large firms scaling back purchases and most hedging via futures rather than holding outright positions. The national cotton monitoring system's September survey projects 2026 national output at 7.46 million tons, down 290,000 tons year-on-year but still a historically high crop. The production decline is limited, and supply pressure will build after the National Day holiday.
Demand: Seasonal Uptick Falls Short
From January to August, national yarn output reached 14.339 million tons, up just 0.7% year-on-year; Xinjiang yarn output rose 17.8% to 2.57 million tons, reflecting continued capacity release. Textile and apparel domestic sales totaled 961.49 billion yuan, up 5.1%, while exports reached $203.31 billion, up 3.1%. Demand shows resilience but moderate growth.
In September, autumn-winter and holiday orders brought a seasonal uptick, with spinning and weaving mills restocking, but order volumes did not surge. Early September mill utilization was 81.9% and yarn sales-to-production ratio 96.7% — both up for a second month but down 1.5 and 0.5 percentage points year-on-year, and down 4.9 and 3.4 points from first-half averages. The peak season is underwhelming, meaning downstream capacity to absorb higher cotton prices is limited, and mills prefer hand-to-mouth replenishment over stockpiling.
Macro factors add pressure: rising Fed rate expectations and higher long-end Treasury yields have strengthened the dollar, weighing on international cotton. The U.S.-China summit produced an eight-point consensus, extending tariff relief to January, and China's tariff reduction list includes U.S. cotton. However, the U.S. list covers only some non-cotton home textiles, not cotton apparel, making the benefit structural rather than broad.