The domestic cotton price experienced a volatile surge and decline in May, reflecting the full impact of the textile industry's off-season and the imbalance in profit distribution between upstream and downstream. The CCIndex 3128B hit a 2.5-year high of 18,211 yuan/ton on May 7, but quickly retreated as demand weakened and external markets dragged. The monthly average of 17,789 yuan/ton was up 23.1% year-on-year, but this level is approaching the tolerance limit of textile enterprises.
Production and Inventory Contraction Under the Off-Season Effect
According to the National Bureau of Statistics, national yarn output in May was 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month. Xinjiang's output was 319,000 tons, down 3.6% month-on-month. The average price of 32s pure cotton yarn was 23,277 yuan/ton, up 795 yuan month-on-month, but the cost side increased more, compressing profit margins. This led to a conservative procurement strategy.
As of the end of May, commercial cotton inventory was 3.745 million tons, down 13.3% month-on-month but still 8.3% higher year-on-year. Industrial inventory was 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. The slow destocking in commercial inventory indicates sluggish intermediate sales, while the decline in industrial inventory shows mills are actively reducing raw material holdings. Together, this signals a shift from 'stockpiling for price increases' to 'buy-as-needed'.
Imports and Exports: External Demand Recovery Cannot Mask Internal Weakness
Cotton imports plunged 31.7% month-on-month to 113,000 tons, the most direct manifestation of the off-season effect. Although still up 2.3 times year-on-year, the sharp month-on-month decline shows a significant weakening in purchasing willingness. Brazilian cotton accounted for 57.7% of imports, while US cotton's share rose to 22.1%, reflecting a diversification strategy amid trade policy uncertainty.
On the export side, textile and apparel exports reached $25.6 billion, up 6.5% month-on-month, with exports to the US and EU up 24.7% and 25.6% respectively. The phase-one trade deal and the zero-tariff policy for African countries supported the recovery. However, cumulative exports from January to May only grew 0.1% year-on-year, indicating the recovery is fragile, and cotton garment exports fell 3.7% year-on-year.
Seedling Conditions and Policy: Limited Supply-Side Support
New cotton planting progress reached 99.5%, but seedling conditions were generally worse than last year. Only 45.9% of surveyed farmers rated seedling conditions as better or equal to last year, a 34 percentage point drop. Continuous rainfall in inland cotton areas caused waterlogging, and the Yangtze River basin's planting progress was 6.9 percentage points slower year-on-year. Although Xinjiang cotton fields have entered the budding stage, local heavy rainfall also affected growth.
The new round of Xinjiang cotton target price policy provided short-term confidence but did not change the supply-demand balance. The China Cotton Association did not adjust its balance sheet this month, suggesting a neutral official view. The USDA May report raised global production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all at multi-year highs, indicating ample global supply.
Narrowing Domestic-International Spread and Shifting Sentiment
The Cotlook A index monthly average was 92 US cents/lb, equivalent to 15,518 yuan/ton after 1% tariff, 2,270 yuan lower than domestic prices, with the spread narrowing by 257 yuan from April. The narrowing spread reduces the price advantage of imported cotton, partly explaining the import plunge. Meanwhile, a stronger US dollar and weak US cotton exports suppressed international prices, while domestic prices could not stand alone amid weak seasonal demand.
The 2026 China Cotton Industry Development Summit Forum held in Chongqing on May 28-29 used 'Change and Reconstruction' as its theme, reflecting the industry's real situation. The event launched a cotton product origin evaluation initiative, which may structurally impact trade flows in the future.