Cotton Market Breaks Below 16,000: Triple Pressures Mount, When Will the Rebound Window Open?

The cotton market experienced a critical breakdown on June 23, as the Zhengzhou cotton futures contract fell below the key psychological barrier of 16,000 yuan/ton, closing at 15,905 yuan/ton, down 105 yuan from the previous settlement. This breach signals a shift in market sentiment from cautious to bearish.

Triple Pressures Converge

While the overall decline in commodity markets that day served as the immediate trigger, the cotton market faces deeper pressures. The first is supply-side pressure: US cotton planting is nearing completion, and the market has raised its new-crop production expectations, leading ICE cotton to close at 78.59 cents/lb, a 1.03% drop. This bearishness has already transmitted to the Chinese import market. The second pressure comes from the macro level: a strengthening US dollar is depressing valuations of dollar-denominated commodities, and simultaneous declines in energy and grain sectors are accelerating capital outflows from cotton. The third pressure is from demand: downstream textile enterprises report disappointing order recovery, with finished product inventories piling up. Mills are only purchasing small batches on an as-needed basis, with no appetite for large-scale stockpiling.

Spot and Import Markets Under Pressure

The spot market is also weakening. The domestic 3128B cotton price index stands at 17,631 yuan/ton, down just 1 yuan, but trading volumes are thin, offering little price support. On June 24, imported cotton quotes at major ports edged lower: the SM grade index, converted to a delivery price, was 14,961 yuan/ton, while the M grade was 14,627 yuan/ton. Notably, the M grade fell more than the SM grade, narrowing the domestic-import spread, yet this has not boosted import buying interest.

Limited Near-Term Rebound Potential

The core logic suppressing cotton prices has not reversed. The ample new-crop supply outlook persists, the strong dollar and weak commodity complex continue to weigh, and the slow recovery in domestic downstream textile consumption offers little demand support. Zhengzhou futures, spot, and imported cotton are likely to remain weak and volatile, with insufficient momentum for a rebound.

Practical Recommendations

For Buyers - Avoid large-scale stockpiling at current levels; maintain a just-in-time purchasing strategy to prevent inventory risks. - Monitor weather conditions in US cotton regions; extreme weather that threatens yields could open a window for phased replenishment. - When the domestic-import spread narrows, evaluate the cost-effectiveness of imported versus domestic cotton, but leave room for exchange rate fluctuations.

For Export Enterprises - In a strong dollar environment, hedge against exchange rate risks in export order pricing to protect margins. - Track the yuan exchange rate trend; if depreciation accelerates, consider accelerating the settlement of foreign exchange. - Watch for signs of order recovery from end users, especially changes in purchasing rhythms from Southeast Asian and South Asian markets, which will be key demand indicators.