The cotton market in May did not sustain the previous unilateral rally but entered a tug-of-war range. Domestic prices hit a two-and-a-half-year high before quickly retreating. Commercial inventories, though down month-on-month, remained above last year's levels, while imports plunged by nearly a third. Exports to the US and EU showed some recovery, but overall growth remained sluggish. These signals point to a core judgment: the industry is shifting from 'expectation-driven' to 'reality-testing' mode, with real pressure on both supply and demand emerging.
High Inventories and Cautious Replenishment: How Cold Is Downstream Demand?
By the end of May, national commercial cotton inventories stood at 3.745 million tons, down 13.3% month-on-month but still 8.3% higher year-on-year. Industrial inventories fell to 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. While destocking is underway, the year-on-year increase indicates that market absorption capacity has not kept pace. Mill operating rates declined, procurement strategies turned to 'small replenishment on dips,' and resistance to high cotton prices was evident. May yarn output was 1.869 million tons, down 1% month-on-month, with Xinjiang output down 3.6%. The average price of 32s pure cotton yarn rose to 23,277 yuan/ton, but the increase was significantly weaker than that of cotton, further compressing mill profitability. This suggests that upstream raw material price hikes have not been smoothly passed downstream, leaving spinners in an awkward position between high costs and weak demand.
Import Plunge and Export Divergence: Uneven External Trade
May cotton imports were only 113,000 tons, plunging 31.7% month-on-month, though up 2.3 times year-on-year due to a low base. Brazilian cotton accounted for 57.7%, followed by US cotton at 22.1%. The sharp drop directly reflects weak seasonal demand, but deeper down, it reveals mills' uncertainty about future prices—they are unwilling to add imported costs with high inventories. On the export side, May textile and apparel exports reached $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year; cumulative exports from January to May edged up 0.1% year-on-year. A bright spot was exports to the US and EU, which grew 24.7% and 25.6% month-on-month, respectively, but cotton garment exports fell 3.7% year-on-year, indicating continued loss of competitiveness in traditional categories. Exports to Belt and Road countries grew 9.7% month-on-month, providing steady support but not enough to offset structural gaps in Western markets.
New Cotton Planting Complete but Seedlings Worrisome: Potential Supply Disruption
By end-May, national cotton planting progress reached 99.5%, essentially complete. However, seedling conditions are concerning: only 45.9% of surveyed farmers rated seedlings as better than or equal to last year, down 34 percentage points year-on-year. 85.5% of cotton was at the 4-8 true leaf stage, down 8.9 percentage points year-on-year. Persistent rainfall in inland cotton areas caused waterlogging, and planting progress in the Yangtze River basin lagged 6.9 percentage points year-on-year. Delayed seedlings imply potential yield losses, and if weather does not improve significantly, new-season output expectations may be revised downward. The USDA's May report raised global production to 26.702 million tons, but domestic uncertainties add a variable to this forecast.
Logic Behind Price Rally and Retreat: Policy Support vs. Seasonal Reality
On May 7, the CCIndex 3128B hit 18,211 yuan/ton, a two-and-a-half-year high, before retreating due to weak seasonal demand and external market declines. The monthly average was 17,789 yuan/ton, up 23.1% year-on-year. The international Cotlook A index averaged 92 US cents/lb, which after 1% tariff conversion was 2,270 yuan lower than domestic prices, with the spread narrowing by 257 yuan month-on-month but remaining wide. The announcement of the Xinjiang target price policy in late May provided a brief boost but failed to reverse the overall trend. Policy support sets a floor, but weak seasonal demand and inventory pressure define a clear ceiling. Cotton prices are likely to oscillate in a wide range, awaiting signals from autumn/winter orders.