Domestic cotton prices rose sharply in early May, with the CCIndex 3128B hitting a two-and-a-half-year high of 18,211 yuan per ton before retreating into range-bound trading by month-end. The Texworld editorial team, after reviewing public data, believes this reversal is not an isolated event but the result of a convergence of off-season effects, policy implementation, and global supply-demand dynamics.
Demand Side: Order Contraction and Profit Squeeze
National Bureau of Statistics data shows that May yarn output reached 1.869 million tons, up 2.7% year-on-year but down 1% month-on-month. Xinjiang's yarn output was 319,000 tons, with a month-on-month decline of 3.6%. The slowdown in yarn output growth directly reflects the traditional off-season in textiles. More notably, the average price of 32-count pure cotton yarn was 23,277 yuan per ton, up 795 yuan month-on-month but only 3.5% higher, far below the 23.1% year-on-year increase in cotton spot prices. This indicates weakening cost pass-through ability and compressed profit margins for spinners.
On exports, customs data shows May textile and apparel exports of $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Exports to the US and EU grew 24.7% and 25.6% month-on-month respectively, while exports to Belt and Road countries increased 9.7%. However, cotton garment exports of $2.04 billion fell 3.7% year-on-year, suggesting high cotton prices are suppressing end-order releases.
Supply Side: Import Decline and Inventory Structure
May cotton imports were only 113,000 tons, plunging 31.7% month-on-month, though still up 2.3 times year-on-year. Brazilian cotton accounted for 57.7%, while US cotton share rose to 22.1%. The import decline directly reflects weak purchasing willingness during the off-season, but the deeper factor lies in narrowing domestic-international price spreads. The Cotlook A index, after including 1% tariff, was 2,270 yuan per ton lower than domestic prices, with the spread narrowing by 257 yuan from the previous month, eroding import cotton's price advantage.
As of end-May, national cotton commercial inventory stood at 3.745 million tons, down 13.3% month-on-month but up 8.3% year-on-year. Industrial inventory was 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. Higher commercial inventory but lower industrial inventory suggests intermediate trade channels are under pressure, while spinners actively destocked in the off-season, relying on just-in-time purchases. The USDA's May report raised 2025/26 global cotton production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all at recent highs, indicating a persistent global supply glut.
Policy and Weather: Short-Term Boost and Long-Term Concerns
The late-May implementation of the new Xinjiang cotton target price policy triggered a modest price rebound. While this stabilizes Xinjiang cotton farmers' expectations, the Texworld editorial team believes its impact on downstream demand is limited—spinners focus on orders and profits rather than subsidy pass-through.
On weather, national cotton planting progress reached 99.5%, with Xinjiang fully planted, but persistent rainfall in inland cotton regions caused waterlogging, leading to poorer seedling conditions than last year. Only 45.9% of surveyed households rated seedling conditions as better or equal to last year, down 34 percentage points year-on-year. The Yangtze River region's planting progress lagged 6.9 percentage points year-on-year, and the Yellow River region lagged 1.4 points. Poor seedling conditions may affect new crop yields, but given ample global supply, the price support from production concerns remains uncertain.
Industry Outlook: From Price Gambling to Cost Control
The May cotton price roller-coaster essentially reflects a shift from expectation-driven to reality-driven markets. Early-month gains were based on Sino-US trade progress and policy expectations, but as the off-season brought insufficient new orders and profit pressure, sentiment quickly turned cautious.
For textile enterprises, the core contradiction has shifted from 'can we source raw materials' to 'can we absorb costs.' Cotton yarn price growth lags behind cotton, indicating limited downstream capacity to absorb high raw material costs. While exports improved month-on-month, year-on-year growth remains negative, and cotton garment export declines exceed the overall figure, suggesting high cotton prices are altering end-use procurement structures.