In May 2026, domestic cotton prices experienced a peak-and-decline pattern, with CCIndex 3128B falling about 400 yuan/ton from the month's high. The apparent off-season effect masks a deeper rebalancing between shrinking supply and demand.
Weak Supply and Demand, Rising Inventory Pressure
According to the National Bureau of Statistics, national yarn output in May reached 1.869 million tons, a modest 2.7% year-on-year increase but a 1% month-on-month decline. Xinjiang's output was 319,000 tons, down 3.6% from April. While output growth slowed, profit pressure intensified: the average price of 32-count pure cotton yarn was 23,277 yuan/ton, up 795 yuan/ton month-on-month but only a 3.5% increase, far below the 23.1% year-on-year rise in cotton prices. This indicates poor cost pass-through, squeezing mill margins.
Inventory data confirms weak demand. By end-May, commercial cotton stocks stood at 3.745 million tons, down 13.3% month-on-month but still 8.3% higher year-on-year. Industrial stocks were 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. Mills purchased only for immediate needs, avoiding high-price inventory buildup.
Import data also reflects demand slowdown. May cotton imports were 113,000 tons, a sharp 31.7% month-on-month drop but still 2.3 times higher year-on-year. Brazilian cotton accounted for 57.7%, while US cotton rose to 22.1%. January-May cumulative imports reached 825,000 tons, up 91% year-on-year. The coexistence of high imports and rising domestic stocks suggests legacy contracts are being fulfilled while new demand is cooling.
Narrowing Price Spread, Structural Export Recovery
Domestic and international cotton prices diverged in May. The domestic monthly average was 17,789 yuan/ton, up 3.6% month-on-month. The international Cotlook A index averaged 92 cents/lb, up 6.5% month-on-month. However, as international prices weakened later in the month, the spread narrowed by 257 yuan to 2,270 yuan/ton. If this trend continues, it will reduce the price advantage of imported cotton, supporting domestic prices.
Exports showed structural recovery. May textile and apparel exports were $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Notably, exports to the US and EU grew 24.7% and 25.6% month-on-month respectively, significantly outpacing the 9.7% growth to Belt and Road countries. This reflects the phased results of US-China trade talks and order repatriation from China's zero-tariff policy with Africa. Cotton garment exports were $2.04 billion, up 11.9% month-on-month but down 3.7% year-on-year, indicating overall external demand recovery remains fragile.
Divergent Growing Conditions, Poorer Seedling Status
By end-May, national cotton planting progress was 99.5%, slightly behind last year. Xinjiang was fully planted, but the Yellow River basin reached 95.6% and the Yangtze River basin 99.3%, both behind last year. Continuous rain in inland cotton areas caused waterlogging, slowing seedling growth. Nationwide, 85.5% of cotton was at the 4-8 true leaf stage, down 8.9 percentage points year-on-year. Only 45.9% of surveyed farmers rated seedling conditions as better or equal to last year, down 34 percentage points. While some Xinjiang fields have entered the squaring stage, overall poor seedling status may impact yield expectations.
Policy and Industry Consensus: Adapting to a New Landscape
In late May, the new round of Xinjiang cotton target price policy was announced, providing short-term market sentiment support but not changing fundamentals. The policy's role is more about stabilizing expectations than driving prices upward. Meanwhile, the 2026 China Cotton Industry Development Summit Forum in Chongqing, themed "Change and Reconstruction: Shaping a New Global Cotton Landscape," attracted nearly 400 delegates. The launch of cotton product origin evaluation work signals the industry's shift from policy dependence to standards and brand building.