May's cotton market traced a curve that soared and then fell. Prices hit a two-and-half-year high early in the month but ended in high-level volatility as demand faded. Behind this movement lies a multi-layered game of seasonal demand contraction, policy support expectations, and profit redistribution along the chain.
Demand Side: Off-Season Effects Fully Appear
May marked the traditional off-season for textiles, with new orders notably insufficient. National Bureau of Statistics data shows national yarn output of 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month. Xinjiang's output was 319,000 tons, up 18.6% year-on-year but down 3.6% month-on-month, a clear signal of slowing growth.
Enterprise procurement strategies turned conservative. Customs data shows May cotton imports of only 113,000 tons, a sharp 31.7% month-on-month drop, though still up 2.3 times year-on-year. Brazil accounted for 57.7% of imports, while US cotton's share rose to 22.1%. Cumulative imports from January to May reached 825,000 tons, up 91% year-on-year, but the single-month decline indicates cautious expectations.
Profit pressure also intensified. The average price of 32-count pure cotton yarn was 23,277 yuan/ton, up 795 yuan month-on-month, but the increase was far below cotton's 3.6% monthly rise. The lagging yarn price suggests mills' margins are being squeezed by raw material costs.
Inventories and Prices: High Stocks Cap Rebound
By end-May, national commercial cotton inventory stood at 3.745 million tons, 8.3% higher year-on-year; industrial inventory was 846,000 tons, down 10.1% year-on-year. High commercial stocks indicate ample supply, while low industrial stocks reflect weak replenishment demand. This structure means once demand recovers, restocking elasticity is high, but near-term price upside is limited by inventory overhang.
Domestic cotton prices hit a two-and-half-year high of 18,211 yuan/ton (CCIndex 3128B) on May 7, then fell due to weak demand and overseas declines. Late-month support from the new Xinjiang target price policy triggered a minor rebound, with monthly average at 17,789 yuan/ton, up 23.1% year-on-year and 3.6% month-on-month.
International prices followed a similar pattern. The Cotlook A index averaged 92 US cents/lb, equivalent to 15,518 yuan/ton after 1% tariff, 2,270 yuan lower than domestic prices. The narrowing spread of 257 yuan means imported cotton becomes more competitive, potentially pressuring domestic prices.
Policy and External Environment: Supportive but Not Driving
Progress in US-China trade talks, coupled with the zero-tariff policy for Africa, boosted export recovery. May textile and apparel exports reached $25.6 billion, up 6.5% month-on-month, with exports to the US and EU up 24.7% and 25.6% respectively. However, year-on-year decline of 2.3% indicates external demand recovery remains fragile.
The Xinjiang cotton target price policy provides cost support. But the policy is more about stabilizing than driving prices. Sustained price increases require demand-side cooperation. The USDA May report raised global cotton output to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all at recent highs, confirming a globally loose supply-demand balance.
New Cotton Growth: Weak Seedlings Raise Yield Concerns
By end-May, national cotton planting progress was 99.5%, slightly slower than last year. Inland cotton regions experienced persistent rain, causing waterlogging and weaker seedlings. Only 45.9% of surveyed households rated seedling conditions as better or equal to last year, down 34 percentage points. 76.8% of fields had mild disease, down 3.2 percentage points.
Xinjiang has completed planting, with some fields entering budding stage, but overall seedling conditions are inferior to last year. If adverse weather continues, yields could be impacted, supporting long-term prices.
Industry Conference: Building Consensus, Launching Origin Evaluation
On May 28-29, the 2026 China Cotton Industry Development Summit Forum was held in Chongqing, with nearly 400 domestic and international delegates. Themed "Change and Reconstruction: Shaping a New Global Cotton Landscape," the forum focused on macro policy, industry chain collaboration, and risk management. The launch of cotton product origin evaluation aims to enhance the brand value and market recognition of domestic cotton, a positive step for long-term industrial upgrading.
Outlook: Near-Term Volatility, Watch Demand Inflection
The core market contradiction is: supply side has policy support and potential crop reduction expectations, but demand side shows clear off-season weakness, with high inventories capping price elasticity. Prices are expected to remain in high-level volatility during June-July. If autumn-winter orders pick up, demand recovery could trigger a new restocking cycle.