The cotton market in May can be summed up in one sentence: the rally driven by expectations was eventually pulled back by reality.
Price Peaked and Then Fell, Inventory Pressure Emerged
On May 7, the CCIndex 3128B surged to 18,211 yuan per ton, a two-and-a-half-year high. But the trend quickly reversed, with the month-end price falling back to around 17,789 yuan per ton. The monthly average was still up 23.1% year-on-year. This rally was mainly driven by tight supply expectations for the new crop and concentrated restocking earlier in the season, but the arrival of the textile off-season quickly changed the supply-demand balance.
Data from the National Bureau of Statistics showed that 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 yarn output was 319,000 tons, down 3.6% month-on-month. Enterprise profit margins were squeezed: the average price of 32s pure cotton yarn was 23,277 yuan per ton, up 795 yuan month-on-month, but the increase was far smaller than the rise in cotton raw material prices. This means that spinners faced resistance in cost pass-through, and terminal orders did not expand simultaneously.
Commercial inventory data confirmed this judgment. By the end of May, national commercial cotton inventory stood at 3.745 million tons, down 13.3% month-on-month but still up 8.3% year-on-year. Industrial inventory was 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. Enterprises showed weak restocking willingness, mainly purchasing on a need-to-buy basis. High cotton prices are suppressing downstream demand.
Imports Plunged, Domestic-International Price Spread Narrowed
The import market also reflected the off-season effect. May cotton imports were only 113,000 tons, a sharp 31.7% drop month-on-month, but still up 2.3 times year-on-year. Brazilian cotton accounted for 57.7%, while US cotton's share rose to 22.1%. The sharp MoM decline in imports indicates that enterprises' acceptance of high-priced foreign cotton has decreased, and they prefer to wait for price corrections before restocking.
Regarding the domestic-international price spread, the monthly average Cotlook A index was 92 US cents per pound. After converting at a 1% tariff, the price was 15,518 yuan per ton, 2,270 yuan lower than domestic cotton prices. The spread narrowed by 257 yuan from the previous month. A narrowing spread means the premium of domestic cotton over the international market is decreasing, weakening the price advantage of imported cotton. This provides some support for domestic prices, but also reflects the pressure from a globally loose supply-demand balance.
The USDA May report raised the 2025/26 global cotton production estimate to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all at recent highs. The global supply glut remains unchanged, which is the fundamental reason why international cotton prices cannot sustain a strong rally.
Policy and Exports: Two Supporting Forces
Despite weak domestic demand, the export side showed positive signals. Progress in Sino-US economic and trade consultations, coupled with the implementation of China's zero-tariff policy for African countries and the narrowing tariff advantage gap with Southeast Asian countries, jointly drove the export recovery. May textile and apparel exports were $25.6 billion, up 6.5% month-on-month. Exports to the US and EU grew 24.7% and 25.6% month-on-month, respectively, showing outstanding performance. Cumulative exports from January to May were $116.73 billion, up 0.1% year-on-year, indicating overall stabilization.
On the domestic policy front, the implementation of a new round of Xinjiang cotton target price policy injected confidence into the market. From May 28 to 29, the 2026 China Cotton Industry Development Summit Forum, hosted by the China Cotton Association, was held in Chongqing, focusing on the theme 'Change and Reconstruction.' The event also launched the evaluation work for cotton product origin. These measures aim to enhance the brand value and market recognition of domestic cotton, which is beneficial for industry stability in the medium to long term.
Seedling Growth Slower, New Crop Output Uncertain
By the end of May, national cotton planting progress was 99.5%, with Xinjiang fully completed. However, continuous rainfall in inland cotton areas caused delays. The Yellow River basin progress was 95.6%, and the Yangtze River basin was 99.3%, both slower than last year. The rainfall led to waterlogging, slowing seedling growth. Only 85.5% of cotton was in the 4-8 true leaf stage, down 8.9 percentage points year-on-year. Only 45.9% of surveyed households believed seedlings were better than last year, a drop of 34 percentage points.
Slower seedling growth means the new crop may be delayed, and yields are uncertain. If weather does not improve, the new season's output could be lower than expected, which will be a key focus for the market in the coming months.