The cotton market in May can be summed up in one word: rollercoaster. Domestic cotton prices hit a 2.5-year high before rapidly retreating, driven not by a single factor but by the convergence of shrinking off-season demand, corrections in policy expectations, and shifts in the global macro environment. For every link in the textile chain, the lessons from this volatility are more important than the price movements themselves.
Demand Side: Off-Season Effect and Profit Squeeze
According to the National Bureau of Statistics, national yarn output in May was 1.869 million tons, up 2.7% year-on-year but down 1% month-on-month. Xinjiang's output reached 319,000 tons, up 18.6% year-on-year but down 3.6% month-on-month. This data clearly shows that while Xinjiang's capacity is still expanding, the entire industry has entered the traditional off-season, with insufficient new orders transmitting to the production side.
More alarming is the profit situation. The average price of 32-count pure cotton yarn was 23,277 yuan/ton, up 795 yuan/ton month-on-month, a 3.5% increase, but significantly weaker compared to the rise in cotton prices. This means that raw material cost increases for mills far outpaced finished product price increases, further compressing profit margins. For cotton textile companies, high cotton prices are shifting from 'good news' to 'burden,' directly dampening procurement willingness.
On the export front, there was a structural recovery. Customs data shows textile and apparel exports in May reached $25.6 billion, up 6.5% month-on-month but still down 2.3% year-on-year. The bright spot was exports to the US and EU, up 24.7% and 25.6% month-on-month, respectively, thanks to progress in US-China trade talks and narrowing tariff gaps with Southeast Asia. However, cumulative exports only grew 0.1% year-on-year, indicating the recovery is not yet solid and is more of a short-term boost from order repatriation and emerging market demand.
Supply Side: Import Plunge and High Inventory
Cotton imports saw a cliff-like drop in May, with 113,000 tons imported, down 31.7% month-on-month. This directly reflects the sharp decline in corporate willingness to buy foreign cotton due to the off-season. Brazilian cotton still dominated with a 57.7% share, while US cotton's share rose to 22.1%, indicating a shift in import structure—companies prefer cost-effective Brazilian cotton over US cotton affected by policy uncertainties.
Meanwhile, commercial inventories, though down 13.3% month-on-month to 3.745 million tons, were still 8.3% higher year-on-year. Industrial inventories stood at 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. The slow pace of destocking suggests insufficient downstream absorption, with the market in a 'goods available, no buyers' state. The USDA's May report raised 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, confirming a loosening global supply.
Price Side: Surge and Retreat Under Three Logics
On May 7, the CCIndex 3128B surged to 18,211 yuan/ton, a 2.5-year high. This rally was driven by three factors: tight new cotton supply expectations, short-term demand from concentrated mill restocking, and sentiment boost from the Xinjiang cotton target price policy. However, the rapid retreat after the peak shows a lack of sustained upward momentum.
The core reason for the retreat was weakening off-season demand and external market drag. The Cotlook A index averaged 92 US cents/lb in May, up 6.5% month-on-month, but was later suppressed by a strong dollar and poor US cotton exports. The domestic monthly average was 17,789 yuan/ton, up 23.1% year-on-year and 3.6% month-on-month, but the domestic-foreign price spread narrowed to 2,270 yuan/ton, down 257 yuan from the previous month. A narrowing spread means imported cotton's price advantage is fading, which may further curb import demand.
Production Areas: Weather Disruptions and Seedling Risks
According to the China Cotton Association survey, as of end-May, national cotton planting progress was 99.5%, slightly slower than last year. Inland cotton areas experienced persistent rainfall, with progress in the Yellow River basin 1.4 percentage points slower and in the Yangtze River basin 6.9 percentage points slower. Only 45.9% of surveyed households rated seedling conditions as better than or equal to last year, down 34 percentage points year-on-year, while 76.8% of fields had light disease, down 3.2 percentage points year-on-year.
This means that despite a stable-to-slightly-lower planted area, weather-induced poor seedling conditions may affect yields. If later replanting or growth recovery falls short, new cotton supply upon harvest could be lower than early estimates, becoming a key support for cotton prices in the second half of the year.