The latest monthly report from the China Cotton Association for May 2026 reveals a clear divergence: domestic cotton prices hit a 2.5-year high before retreating, as fundamentals failed to sustain the rally. The average spot price was 17,789 yuan/ton, up 23.1% year-on-year but only 3.6% month-on-month, indicating fading upward momentum.
Supply and Demand Both Weakening
May marks the traditional off-season, and the transmission signals are clear. According to the National Bureau of Statistics, national yarn output was 1.869 million tons, down 1% month-on-month, with Xinjiang dropping 3.6%. Though yarn prices followed cotton higher, the 32s combed cotton yarn average of 23,277 yuan/ton rose only 3.5% month-on-month, lagging cotton's 3.6% gain, squeezing margins.
Enterprises turned cautious in restocking. By end-May, commercial cotton inventories stood at 3.745 million tons, down 8.3% year-on-year but still 8.3% above last year's level, implying slower destocking. Industrial inventories were 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year, reflecting mills' reluctance to accept high prices.
Import data echoes weak demand. May cotton imports were 113,000 tons, plunging 31.7% month-on-month. Although up 2.3 times year-on-year on a low base, the sharp monthly drop signals reduced appetite for foreign cotton. Brazilian cotton remained dominant at 57.7%, while US cotton's share rose to 22.1%, reflecting structural shifts in trade channels.
Policy Support vs. External Pressures
In early May, positive progress in US-China trade talks and a new Xinjiang cotton target price policy boosted sentiment, pushing the CCIndex 3128B to 18,211 yuan/ton on May 7, a 2.5-year high. But the rally faded as fundamentals took over. A late-month policy bounce failed to reverse the trend, leaving prices in a high-level range.
Globally, the USDA's May report raised 2025/26 world cotton production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all near historical highs. International prices were pressured by a strong dollar and weak US export data, with the Cotlook A index averaging 92 US cents/lb. After 1% tariff conversion, the domestic premium narrowed to 2,270 yuan/ton, down 257 yuan from April.
Exports showed structural bright spots. May textile and apparel exports reached $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Exports to the US and EU grew 24.7% and 25.6% month-on-month respectively, and to Belt and Road countries by 9.7%. However, cotton garment exports fell 3.7% year-on-year, suggesting high cotton prices are eroding end-market competitiveness.
New Crop and Weather Variables
By end-May, national cotton planting progress reached 99.5%, essentially complete. However, persistent rains in inland areas slowed planting in the Yellow River and Yangtze River basins by 1.4 and 6.9 percentage points respectively. Only 45.9% of surveyed farmers rated current seedling conditions better than last year, down 34 percentage points. Disease severity was light in 76.8% of fields, down 3.2 percentage points. This introduces downside risk to new-crop yield expectations.
Industry Consensus and Origin Evaluation
On May 28-29, the China Cotton Association hosted the 2026 China Cotton Industry Development Summit in Chongqing, themed "Change and Reconstruction: Shaping a New Global Cotton Landscape." Nearly 400 delegates attended, and the event launched a cotton product origin evaluation program, signaling an industry push for standardized traceability systems to meet international compliance demands.