In May 2026, China's domestic cotton prices peaked at a 2.5-year high and then retreated sharply, with a monthly fluctuation exceeding 500 yuan per ton, signaling a shift from optimism to rational market gaming. The China Cotton Index (CCIndex 3128B) hit 18,211 yuan/ton on May 7 before falling due to weak off-season demand and a bearish external market. This price volatility reflects the accelerating transmission of traditional off-season effects along the textile chain.
Off-Season Effects Accelerate: Slower Yarn Output, Squeezed Margins
After entering the traditional off-season in May, insufficient new orders became widespread. According to the National Bureau of Statistics, national yarn output was 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month, with significantly slower growth. Xinjiang saw an 18.6% year-on-year increase but a 3.6% monthly decline. Profit pressure was more direct: the average price of 32s pure cotton yarn was 23,277 yuan/ton, up 795 yuan month-on-month, but the increase lagged behind rising cotton raw material costs, squeezing mill margins.
Export markets showed structural divergence. Customs data showed textile and apparel exports of $25.6 billion in May, 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, indicating phased restocking after tariff policy easing. Exports to Belt and Road countries grew 9.7% month-on-month, more moderately. Cotton garment exports were $2.04 billion, up 11.9% month-on-month but still down 3.7% year-on-year, suggesting fragile end-consumer recovery.
Cotton Imports Plummet, Inventory Structure Reveals Cautious Procurement
The off-season effect directly impacted imports. May cotton imports were only 113,000 tons, plunging 31.7% month-on-month. Although still up 2.3 times year-on-year, the monthly decline was the largest in nearly a year. Brazilian cotton accounted for 57.7% of imports, leading, while US cotton share rose to 22.1%, reflecting mills' preference for cost-effectiveness and supply stability. Cumulative imports from January to May reached 825,000 tons, up 91% year-on-year, but growth is slowing.
Inventory data further confirms cautious procurement. By end-May, national commercial cotton inventory was 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 but lower industrial inventory means downstream mills prefer hand-to-mouth buying and opportunistic restocking, rather than building strategic reserves. This destocking strategy continues to pressure prices.
New Cotton Planting Complete, But Seedling Conditions Raise Concerns
According to the China Cotton Association, national cotton planting progress reached 99.5% by end-May, essentially complete. However, seedling data is worrying: 85.5% of cotton was at the 4-8 true leaf stage, down 8.9 percentage points year-on-year, and only 45.9% of surveyed farmers rated seedling conditions as better or equal to last year, a sharp 34 percentage point drop. Continuous rainfall in inland cotton regions caused waterlogging, with the Yellow River basin planting progress 1.4 percentage points behind last year and the Yangtze River basin 6.9 points behind.
This implies that despite the USDA raising 2025/26 global cotton production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, uncertainties in China's production could revise the global balance later. If seedling conditions continue to deteriorate, new crop output may fall below expectations, providing a key support for prices in H2.
Narrowing Domestic-International Spread, Industry Restructuring
In May, the Cotlook A index averaged 92 cents/lb, equivalent to 15,518 yuan/ton after 1% tariff, 2,270 yuan lower than domestic prices, with the spread narrowing 257 yuan from April. The narrowing spread reduces the cost advantage of imported cotton and compresses mills' cost buffers. At the 2026 China Cotton Industry Development Summit, delegates discussed "Change and Restructuring", and the launch of cotton product origin evaluation signals a shift from price competition to quality and traceability competition.