Cotton Price Breaks Key Support Level: Bottom Not Yet in Sight, Supply Chain Under Pressure

Zhengzhou cotton futures broke through the key psychological level of 16,000 yuan per ton on June 23, closing at 15,905 yuan/ton, down 105 yuan from the previous settlement. This is not just a numerical breach; it signals that bearish sentiment has fully taken hold in the market. Short positions have been increasing, while longs show little willingness to fight back. On the spot side, the 3128B price index stood at 17,631 yuan/ton, down only 1 yuan, but trading volumes were extremely thin. Downstream mills are buying only on a need-to-order basis, in small lots, with no sign of stockpiling.

Domestic and International Markets in Sync, Bearish Factors Not Isolated

At the same time, ICE cotton futures closed at 78.59 cents per pound, down 1.03%. The logic behind the decline in U.S. cotton is clearer: the planting season is nearly complete, and the market has raised its expectations for new crop production, sending a clear signal of ample supply. Meanwhile, a stronger U.S. dollar is weighing on all dollar-denominated commodities, and capital has been flowing out of the cotton market for several weeks. This systemic decline has directly transmitted to Chinese ports. On June 24, imported cotton prices all moved lower—the SM grade was equivalent to 14,961 yuan/ton, and the M grade to 14,627 yuan/ton. Notably, medium-grade M cotton fell more than high-grade SM cotton.

What is worth noting is that while the price gap between domestic and imported cotton is narrowing, the appeal of imported cotton has not increased. The reason lies in the sluggish recovery of downstream orders. Textile mills are saddled with high finished product inventories and tight cash flow, making them more inclined to work down existing stocks than to take on new purchases. Even lower imported prices are not enough to stimulate effective demand.

Triple Headwinds, No Near-Term Catalyst for Rebound

Three core factors are currently suppressing cotton prices, and none show signs of reversing in the short term. First, ample supply expectations: U.S. new crop production estimates are being raised, and global cotton stocks-to-use ratios are likely to rise further. Second, persistent macro pressure: a stronger dollar, combined with a broad sell-off in energy, grains, and financial assets, is driving systemic capital outflows. Third, weak domestic demand: the recovery in textile end-consumption is slow, with no significant improvement in either domestic or export orders, and mills show extremely low willingness to replenish inventories.

These three factors reinforce each other, creating a negative feedback loop of "price decline → wait-and-see → further price decline." As long as none of these variables sees a material positive change, cotton prices will struggle to find a foothold for a rebound. The market now needs an external force to break the cycle—perhaps extreme weather in U.S. cotton regions that triggers production cut expectations, or a targeted policy stimulus for China's textile industry.

Industrial Cluster Reactions: From Wait-and-See to Active Contraction

As cotton prices continue to weaken and orders remain insufficient, major textile industrial clusters are shifting from "wait-and-see" to "active contraction." In core production areas like Keqiao in Shaoxing, Nantong home textiles, and Shengze weaving, operating rates have been lowered, and some small and medium-sized enterprises have opted for staggered production shifts or even temporary shutdowns. Gray fabric inventory days have lengthened, traders are cutting prices to destock, and fabric prices are following cotton downward but with a lag, squeezing weaving margins further.

For upstream ginners, a futures price of 16,000 yuan/ton means heavy losses on high-cost inventories. Some traders have begun to destock at lower prices, but downstream buyers remain unresponsive, and market liquidity continues to deteriorate. In Xinjiang, the cost of planting the new crop is rigid. If futures prices stay below 16,000 yuan/ton for an extended period, it will directly impact pricing for the new season's seed cotton purchases.

Practical Recommendations

For Buyers - With cotton prices in a downtrend, avoid large-scale concentrated purchases. Stick to a "buy as needed, small lots, high frequency" strategy to avoid additional losses from inventory depreciation. - Monitor the domestic-imported cotton price spread. If the spread widens to more than 1,000 yuan/ton in favor of imported cotton, consider moderately increasing imported cotton purchases to lock in cost advantages. - Negotiate short-term floating price contracts with suppliers to partially transfer price risk and avoid being locked into a fixed price at an unfavorable level.

For Foreign Trade Companies - Shorten export order quotation cycles to 2-4 weeks to avoid large discrepancies between quoted prices and transaction prices due to cotton price fluctuations. - Include raw material price adjustment clauses in contracts. When cotton prices fluctuate beyond a certain threshold (e.g., ±5%), automatically trigger a price renegotiation mechanism. - Keep a close eye on the RMB exchange rate. A stronger dollar means higher RMB value for export receipts, but it also lowers the cost of imported cotton—balance these dynamics carefully.