The cotton market is undergoing a stress test driven by a confluence of macro sentiment and fundamental pressures. On June 23, the main Zheng cotton futures contract broke through the psychological threshold of 16,000 yuan/ton, closing at 15,905 yuan/ton, down 105 yuan. This is not merely a technical breakdown but a concentrated realization of three bearish factors: ample supply expectations, a strong dollar, and sluggish downstream demand.
Industry Logic Behind the Break
While the futures breakdown has intensified bearish sentiment, the spot market's parallel weakness is more telling. The domestic 3128B cotton price index stood at 17,631 yuan/ton, down only 1 yuan, but this apparent stability lacks transactional support. Downstream textile mills have seen order recovery fall short of expectations, with finished goods inventories piling up. Procurement has shifted entirely to 'need-based small batch replenishment,' meaning even lower futures prices won't trigger bulk buying. Demand elasticity is eroding.
The international market is more complex. ICE cotton's main contract closed at 78.59 cents/lb, down 1.03%. The drivers are multiple: US cotton planting is nearly complete, raising new-crop output expectations; a strengthening dollar depresses dollar-denominated commodity valuations; and a broad selloff in energy, grains, and financial assets is driving capital out of cotton. This systemic pressure cannot be resolved by cotton alone.
Import Cotton Spread Narrows, But Appeal Doesn't Rise
The external decline quickly transmitted to Chinese ports. On June 24, import cotton quotes across major ports edged down. Under 1% tariff, SM grade was at 14,961 yuan/ton and M grade at 14,627 yuan/ton. Notably, M grade fell more (0.72 cents/lb) than SM grade (0.59 cents/lb), narrowing the domestic-import spread. Normally, a narrower spread would boost import appeal, but actual procurement hasn't increased—weak downstream demand remains the binding constraint.
- International Cotton Index SM: 88.92 cents/lb, down 0.59 cents/lb
- International Cotton Index M: 86.99 cents/lb, down 0.72 cents/lb
Short-Term Rebound Unlikely: Three Key Variables
None of the core bearish logics have shown signs of reversal. Ample new-crop supply expectations persist, the strong dollar and broad commodity weakness won't change soon, and domestic textile consumption recovery remains slow with no clear improvement in end orders. Zheng cotton, spot, and import prices are likely to remain weak and volatile, with little rebound momentum.
Instead of guessing a bottom, industry participants should focus on three variables:
- US cotton belt weather: drought or pests during the critical growing period could reverse supply expectations
- Domestic end orders: destocking speed depends on whether downstream apparel and home textile orders pick up
- RMB exchange rate: fluctuations directly impact import costs and alter the domestic-import spread
Only substantive positive changes in these variables can break the current downtrend. Until then, cautious观望 and inventory risk control are the more rational strategies.