On June 23, the main Zhengzhou cotton contract broke through the critical psychological barrier of 16,000 yuan per ton, closing at 15,905 yuan per ton, down 105 yuan from the previous settlement. This marks the first time since early 2025 that cotton futures have fallen below this key level. Bearish sentiment surged in the market, with open interest increasing, indicating a consensus among traders on further downside.
This decline was not driven by a single factor. The entire domestic commodity market weakened on that day, with the cotton sector bearing the brunt of systemic selling pressure. Meanwhile, the external market also exerted pressure, with the main ICE cotton contract falling 1.03% to close at 78.59 cents per pound.
External Transmission and Spot Market Reaction
Bearish factors in the international market converged. The US cotton planting season is nearing completion, with market expectations of a loose supply for the new season fundamentally undermining price support. Additionally, a strengthening US dollar depressed valuations of dollar-denominated commodities, and with energy and grain sectors also declining, funds flowed out of the cotton market.
The external decline quickly transmitted to domestic ports on June 24. The international cotton price index for SM grade fell 0.59 cents to 88.92 cents per pound, with a 1% tariff delivery price of 14,961 yuan per ton. The M grade index fell 0.72 cents to 86.99 cents per pound, with a delivery price of 14,627 yuan per ton. Notably, the M grade fell more than the SM grade, indicating weaker demand expectations for lower-quality cotton and a deteriorating price structure.
Despite the narrowing domestic-import price spread, purchasing enthusiasm did not pick up. The core reason is the lack of support from the domestic spot market. On June 24, the domestic cotton 3128B price index stood at 17,631 yuan per ton, down only 1 yuan, but this narrow fluctuation masked extremely low trading volumes. Downstream textile mills reported slower-than-expected order recovery and rising finished product inventories, purchasing only small batches on a need-to basis, with no appetite for large-scale replenishment.
The Deep Logic of Weak Supply and Demand
The core contradiction in the current cotton market is 'weak supply and weak demand.' On the supply side, expectations of a loose new season for US cotton, coupled with a strong dollar, suppress the price competitiveness of imported cotton. On the demand side, the recovery of domestic textile consumption is sluggish, with mills preferring to maintain low inventory levels rather than actively restocking at current prices.
This pattern means that a price rebound requires two conditions to be met simultaneously: first, an unexpected supply disruption, such as adverse weather in US cotton regions or a reduction in planted acreage; second, a substantial improvement in demand, such as consecutive month-on-month increases in textile orders. Based on available data, neither condition is likely to materialize in the short term.
Price Expectations and Operational Strategies
Given the above analysis, Zhengzhou cotton may trade below 16,000 yuan per ton for longer than the market expects. Bearish sentiment has not fully played out, spot markets lack buying support, and imported cotton offers no clear price advantage. The triple pressure suggests that cotton prices will likely continue their weak, volatile trend.
For textile mills, the key is not to predict the bottom but to establish a procurement and inventory management system that can cope with a prolonged weak market. Blindly bottom-fishing risks further losses, while complete inaction may miss periodic lows.
For Buyers - Implement a batch procurement mechanism, splitting annual cotton needs into 3-4 purchasing windows. Start the first round of trial purchases now to lock in some low-cost supply. - Monitor the domestic-import price spread. If the spread narrows to within 1,000 yuan per ton, consider increasing imported cotton allocation, leveraging exchange rate fluctuations for better pricing. - Negotiate floating basis contracts with upstream suppliers, linking prices to spot indices to reduce the risk of betting on market direction.
For Textile Mills - Optimize finished product inventory management, compressing inventory for standard products to 15-20 days to reduce capital tie-up and improve turnover efficiency. - Strengthen end-order tracking. If orders show signs of recovery for two consecutive weeks, initiate raw material restocking in advance to avoid cost spikes from concentrated buying. - Monitor RMB exchange rate trends. If the RMB depreciates, imported cotton costs will rise; in such cases, prioritize domestic cotton sources.
The current cotton market is in a typical 'bad news priced in, but good news not yet arrived' phase. For industry participants, patience outweighs frequent trading. The next signal for a market turnaround will likely come from adverse weather in US cotton regions or consecutive improvements in domestic textile orders. Until then, maintaining a cash-rich, flexible procurement strategy is the prudent approach.