In the final week of June 2026, global cotton markets remained trapped in a classic 'ceiling and floor' pattern. The main contract on the Zhengzhou Commodity Exchange settled at 15,869 yuan per ton, down 25 yuan week-on-week, while the China Cotton Price B Index, representing standard-grade lint, averaged 17,477 yuan per ton, up 30 yuan. NY futures fell more sharply, with the main contract closing at 77.55 cents per pound, down nearly 1 cent. The domestic-international price spread remained elevated at 3,140 yuan per ton.
Divergent Signals in Supply and Demand
The core contradiction in today's cotton market is the tug-of-war between weak short-term demand and medium-to-long-term supply contraction expectations. On the demand side, China's textile market has entered the traditional off-season. The average price of C32S carded cotton yarn was 23,274 yuan per ton, up a negligible 9 yuan. More notably, imported yarn was 235 yuan cheaper than domestic yarn, squeezing mill margins. Meanwhile, polyester staple fiber prices fell 128 yuan to 7,365 yuan, strengthening the substitution effect against cotton.
On the supply side, global weather uncertainty remains the biggest variable. India's Ministry of Agriculture reports that monsoon rainfall as of late June was 43% below the historical average, with forecasts suggesting weak rains into early July. India's cotton crop is heavily dependent on June-July precipitation. In the US, while 2026/27 planting had reached 92% completion, the crop's good-to-excellent rating stood at only 44%, though up 9 percentage points year-on-year.
Xinjiang's Regional Disparities
China's cotton is entering its critical growth phase. In Xinjiang, the main production region, squaring rates reached 94-95%, with early flowering beginning in some areas. However, regional disparities are evident: northern Xinjiang benefits from favorable moisture and temperature, while southern Xinjiang faces irrigation stress due to high temperatures and evaporation. Inland cotton regions are generally stable. No systemic production risk exists yet, but attention must focus on high temperatures and irrigation conditions.
Mills' procurement strategies reflect market caution. Raw material inventories remain low, with purchases limited to immediate needs. This is directly linked to insufficient downstream orders and thin margins. Without clear demand improvement, mills lack the incentive to rebuild stocks.
External Environment Shifts
Some positive external signals have emerged. Following the US-Iran memorandum, the Strait of Hormuz is temporarily open for 60 days, with oil prices falling back to pre-conflict levels. Daily oil transit has recovered to about 4.8 million barrels, potentially freeing 300,000 TEUs of container capacity and easing logistics bottlenecks. This could provide temporary relief on shipping costs for textile exporters.
Domestically, monetary policy has been fine-tuned. The People's Bank of China injected 200 billion yuan via MLF operations to ensure ample liquidity. Policy dividends are showing results: industrial enterprise profits rose 18.8% year-on-year in the first five months, with textile industry profits up 11.7%, demonstrating some resilience. However, profit growth is more driven by cost-side improvements than demand-side recovery.
Near-Term Outlook and Recommendations
Cotton prices are expected to remain range-bound in the near term, caught between weak demand and supply contraction expectations. The market's focus will gradually shift to new-crop production estimates. If India's monsoon remains weak or US crop conditions deteriorate, supply-side narratives could push prices above the current range. Conversely, without demand improvement, downside risks persist.