The cotton market in May clearly illustrated the typical characteristics of the textile off-season: prices surged to a peak and then quickly retreated, further squeezing profit margins across the industry chain. According to the monthly report from the China Cotton Association, domestic cotton prices hit a two-and-a-half-year high at the beginning of the month before turning downward, while cotton imports fell by more than 30% month-on-month, signaling a period of active inventory destocking.
Price Peaked and Fell, Domestic-International Spread Narrowed
The average domestic cotton spot price in May was 17,789 yuan per ton, up 23.1% year-on-year and 3.6% month-on-month. However, the intra-month trend was an inverted V-shape: on May 7, the CCIndex 3128B briefly surged to 18,211 yuan per ton, a 30-month high. The early-month rally was driven by expectations of tight new-crop supply and concentrated restocking by textile mills. But as the traditional off-season set in and new orders fell short, downstream purchasing quickly turned cautious, and prices retreated. Late in the month, the announcement of a new round of Xinjiang cotton target price policies briefly boosted market sentiment, leading to a modest rebound, but prices ultimately ended the month in a high-level consolidation.
International cotton prices moved in sync with domestic ones but with less volatility. The monthly average Cotlook A index was 92 US cents per pound, up 6.5% month-on-month. Converted at a 1% tariff rate, imported cotton was priced at approximately 15,518 yuan per ton, 2,270 yuan lower than domestic cotton, narrowing the spread by 257 yuan from the previous month. This indicates that the price advantage of imported cotton is diminishing, reducing its impact on the domestic market.
Weak Downstream Demand, Divergent Inventory Structures
On the production side, national yarn output in May was 1.869 million tons, up 2.7% year-on-year but down 1% month-on-month. Xinjiang produced 319,000 tons, up 18.6% year-on-year but also down 3.6% month-on-month. The slowdown in output growth directly reflects insufficient orders. More notably, on the profit side: the average price of 32-count pure cotton yarn was 23,277 yuan per ton, up 795 yuan month-on-month, but the increase was far smaller than that of raw cotton, significantly squeezing corporate profitability.
Inventory data further confirms the cautious market sentiment. As of the end of May, national commercial cotton inventories stood at 3.745 million tons, down 13.3% month-on-month but still 8.3% higher year-on-year. Industrial inventories were 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. Commercial inventories remaining above last year's level indicate that overall market supply is not tight, while the decline in industrial inventories suggests that textile mills are actively reducing raw material holdings in response to uncertain downstream demand.
Sharp Drop in Imports, Structural Recovery in Exports
Affected by weak purchasing willingness during the off-season, May cotton imports were only 113,000 tons, plunging 31.7% month-on-month. Although the year-on-year comparison still showed growth of 2.3 times due to a low base, the sharp month-on-month decline sends a clear signal: mills are less willing to accept high-priced foreign cotton. In terms of import sources, Brazilian cotton accounted for 57.7%, ranking first, while the share of US cotton rose to 22.1%. Cumulative imports from January to May reached 825,000 tons, up 91% year-on-year, keeping annual imports at a high level.
On the export front, a structural recovery emerged. May textile and apparel exports were $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Cumulative exports from January to May were $116.73 billion, up a marginal 0.1% year-on-year. By market, exports to the US and the EU grew strongly, up 24.7% and 25.6% month-on-month, respectively; exports to Belt and Road countries rose 9.7% month-on-month. The phased progress in Sino-US trade talks and the official implementation of China's zero-tariff policy for African countries were the main drivers of the cyclical improvement in exports.
New Crop Planting Completed, Seedling Conditions Weaker Than Last Year
As of the end of May, national cotton planting progress was 99.5%, essentially complete. However, seedling conditions are concerning: only 45.9% of surveyed farmers considered current seedlings better than or equal to last year, a drop of 34 percentage points year-on-year. Continuous rainfall in inland cotton regions has caused waterlogging, delaying seedling growth. Nationwide, 85.5% of cotton plants were in the 4-8 true leaf stage, down 8.9 percentage points from last year. While Xinjiang cotton fields have entered the squaring stage, overall seedling conditions remain weaker than last year.
The USDA May report raised the 2025/26 global cotton production forecast to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all at multi-year highs. The global supply-demand balance remains loose, putting downward pressure on forward cotton prices.