In May, domestic cotton prices experienced a complete cycle of 'surge, correction, and fluctuation.' The CCIndex 3128B hit a 2.5-year high of 18,211 yuan/ton at the beginning of the month but retreated to a monthly average of 17,789 yuan/ton. This was not a simple supply-demand mismatch but the result of intertwined off-season effects, policy expectations, and external macro factors.
Off-Season Transmission: A Chain Reaction from Orders to Inventories
The textile industry entered the traditional off-season in May, with yarn production growth slowing significantly. National Bureau of Statistics data shows national yarn output reached 1.869 million tons, down 1% month-on-month, with Xinjiang output at 319,000 tons, down 3.6% month-on-month. More concerning is the deterioration in profitability: although the average price of 32-count pure cotton yarn rose 795 yuan/ton month-on-month to 23,277 yuan/ton, the increase was weaker than that of cotton, further compressing corporate profit margins.
This 'raw materials up, finished products not up' situation directly suppressed purchasing intentions. May cotton industrial inventories fell to 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year, reflecting spinners' resistance to high cotton prices. Meanwhile, commercial inventories, despite a 13.3% month-on-month decline to 3.745 million tons, were still 8.3% higher year-on-year, indicating lingering destocking pressure.
Insufficient orders are the core issue. Although textile and apparel exports grew 6.5% month-on-month to $25.6 billion, they were still down 2.3% year-on-year. Cotton garment exports reached $2.04 billion, up 11.9% month-on-month but down 3.7% year-on-year, suggesting the recovery is more seasonal restocking than a trend reversal. Exports to the US and EU grew over 24% month-on-month, while those to Belt and Road countries grew 9.7%, with strong US and EU contributions but questionable sustainability.
Imports and Inventories: Two Key Supply-Side Variables
Cotton imports plummeted to 113,000 tons in May, a sharp 31.7% month-on-month decline. This was not due to overseas supply shortages but the combined effect of weak domestic demand and narrowing domestic-international price spreads. The monthly average Cotlook A index was 92 US 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 the previous month. The price advantage of imported cotton is fading, naturally slowing corporate purchasing.
Import source structure also shifted subtly: Brazilian cotton dominated at 57.7%, while US cotton share rose to 22.1%. This reflects both improved market acceptance of US cotton following the phased US-China trade talks and Brazilian cotton's strengthening position due to its price and quality advantages.
The USDA May report raised 2025/26 global cotton production 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 glut remains unchanged, exerting medium-to-long-term pressure on domestic prices.
New Cotton Planting: Weak Seedlings Raise Supply Concerns
By end-May, national cotton planting progress reached 99.5%, essentially complete. However, seedling data is worrying: only 45.9% of surveyed households rated seedling conditions as good as or better than last year, a sharp 34 percentage point drop year-on-year. Continuous rainfall in inland cotton areas caused waterlogging, with planting progress in the Yangtze River basin 6.9 percentage points slower year-on-year and the Yellow River basin 1.4 percentage points slower. Nationally, 85.5% of cotton was in the 4-8 true leaf stage, down 8.9 percentage points year-on-year.
This suggests potential downward risk for 2026 new cotton yields. Although Xinjiang's light and heat conditions are generally suitable, local excessive rainfall has affected seedling development. If subsequent weather fails to compensate, expectations of tight supply when new cotton hits the market could push prices up again.
Policy and Conference: Industry Consensus on 'Change and Reconstruction'
The 2026 China Cotton Industry Development Summit Forum, hosted by the China Cotton Association in Chongqing on May 28-29, with the theme 'Change and Reconstruction: Shaping a New Global Cotton Landscape,' attracted nearly 400 domestic and international delegates. The meeting officially launched cotton product origin evaluation work, marking a substantial step toward supply chain transparency and brand value building.
The new round of Xinjiang cotton target price policy implemented in late May directly drove a short-term price rebound. The policy aims to protect farmers' incomes while guiding the industry toward high-quality, sustainable development. However, the market is more focused on implementation details and subsidy levels, which will be key variables affecting second-half cotton planting intentions and price expectations.