Domestic cotton prices in May hit a two-and-a-half-year high before retreating sharply. Although the monthly average price rose over 20% year-on-year, the industry's actual experience was 'price hikes without profit gains'. Yarn output fell month-on-month, mills were cautious about replenishing stocks, and cotton imports plummeted—these signals converge on one reality: the textile chain is shifting from cost-push to genuine demand-side pressure.
Supply and Demand Both Contract
According to the National Bureau of Statistics, May yarn output 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% sequentially. The average price of 32-count pure cotton yarn rose to 23,277 yuan/ton, up 795 yuan month-on-month, but far below the 23.1% year-on-year increase in raw cotton prices, significantly squeezing mill margins.
Commercial cotton stocks stood at 3.745 million tons, down 13.3% month-on-month but still 8.3% higher year-on-year. Industrial stocks were 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. This inventory structure shows limited upstream destocking and weakening willingness downstream to absorb high-priced raw materials, with just-in-time purchasing becoming the norm.
The Logic Behind the 'Cliff-Like' Drop in Imports
May cotton imports were only 113,000 tons, plunging 31.7% 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 month-on-month decline directly reflects reduced overseas purchases due to weak seasonal orders. A deeper reason is the narrowing domestic-international price spread to 2,270 yuan/ton, diminishing the cost advantage of imported cotton.
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 near historical highs. This suggests limited upside for international prices, and the spread may narrow further, reducing import appeal.
Structural Divergence in Export Recovery
May textile and apparel exports reached USD 25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Cumulative exports for Jan-May were USD 116.73 billion, a marginal 0.1% year-on-year increase. The month-on-month rebound was driven by progress in US-China trade talks, the implementation of zero-tariff policies for Africa, and demand from Belt and Road countries.
By market, exports to the US and EU grew 24.7% and 25.6% month-on-month respectively; exports to Belt and Road countries rose 9.7%. However, cotton-made garment exports were only USD 2.04 billion, down 3.7% year-on-year but up 11.9% month-on-month, indicating that cotton product recovery lags behind man-made fiber categories. The US and EU growth came mainly from non-cotton products.
New Cotton Planting Complete, Seedling Worries Emerge
By end-May, national cotton planting progress reached 99.5%, slightly behind last year. Xinjiang is fully planted, but the Yellow River and Yangtze River regions lagged by 1.4 and 6.9 percentage points respectively. Persistent rainfall in inland areas caused waterlogging, slowing seedling growth.
Nationally, 85.5% of cotton was at the 4-8 true leaf stage, down 8.9 percentage points year-on-year. Only 45.9% of surveyed farmers rated seedling conditions as better or equal to last year, down 34 percentage points. 76.8% of fields had mild disease, down 3.2 percentage points. Weak seedlings and rising pest risks leave room for downward adjustments in new crop yield expectations, providing a floor for forward prices.
Policy vs. Market Tug-of-War
The 2026 China Cotton Industry Development Summit Forum was held in Chongqing on May 28-29, themed 'Transformation and Reconstruction'. The new round of Xinjiang cotton target price policy provided a floor for the market, but the contradiction between policy support and weakening demand remains unresolved.
The domestic monthly average cotton price was 17,789 yuan/ton, up 23.1% year-on-year and 3.6% month-on-month. CCIndex 3128B peaked at 18,211 yuan/ton on May 7 before retreating, with a slight rebound in late May after policy news. The international Cotlook A index averaged 92 US cents/lb, up 18% year-on-year and 6.5% month-on-month, translating to 15,518 yuan/ton—2,270 yuan lower than domestic prices. The narrowing spread means domestic prices lack external support; if demand remains weak, downward pressure will intensify.