The price gap between domestic and international cotton is widening. According to data from the China Cotton Market Weekly Report for the week of June 22-26, the landed cost of the International Cotton Index (M) at China's main ports, based on a 1% tariff, stood at 14,337 yuan per ton, while the domestic standard-grade lint cotton price (National Cotton Price B Index) was 17,477 yuan per ton. The spread reached 3,140 yuan per ton. For spinning mills, this means using domestic cotton costs over 3,000 yuan more per ton than imported cotton, putting clear cost pressure on local yarn.
But the cotton price stalemate goes beyond cost. The average settlement price for the Zhengzhou Cotton Futures main contract was 15,869 yuan per ton, down 0.2% week-on-week. The New York Cotton Futures main contract averaged 77.55 US cents per pound, a 1.2% decline. Spot markets also moved narrowly, with the domestic cotton price index actually edging up 0.2%. Long and short forces appear to have reached a fragile equilibrium at current levels.
The Battle Between Supply and Demand
The key variable on the supply side is weather. USDA data shows that as of June 21, 92% of the 2026/27 US cotton crop had been planted, with the core Texas region reaching 90%. However, the US cotton good-to-excellent rating was only 44%, though up 9 percentage points year-on-year, it remains low. India's situation is more severe. As of this week, India's monsoon rainfall was about 43% below the historical average, and India's cotton planting is highly dependent on June-July monsoon precipitation. The meteorological department predicts weak rainfall into early July, threatening the new season's cotton output if the deficit persists.
Domestically, the squaring rate in Xinjiang's main cotton regions is around 94-95%, with some fields beginning to see sporadic flowering. National cotton growth is progressing normally to slightly ahead of schedule, but regional differentiation is clear: northern Xinjiang has favorable water and heat conditions, while southern Xinjiang faces local irrigation pressure due to periodic high temperatures and enhanced evapotranspiration. There is no systemic production risk at present, but the impact of later-stage high temperatures and irrigation conditions on yields needs continuous monitoring.
The demand side shows typical off-season characteristics. The domestic C32S carded ring-spun yarn average price was 23,274 yuan per ton, up only 9 yuan from the previous week. The average price for major imported C32S carded ring-spun yarn was 23,039 yuan per ton, flat week-on-week. Imported yarn was 235 yuan per ton cheaper than domestic yarn, a glaring contrast against the backdrop of high domestic cotton costs. Polyester staple fiber prices fell 128 yuan to 7,365 yuan per ton, and the substitution effect of man-made fibers for cotton is strengthening.
Macro and Geopolitical Disturbances
The Middle East situation has seen a phase of détente. The US and Iran signed a memorandum of understanding, temporarily opening the Strait of Hormuz for 60 days with no fees. The US has relaxed some restrictions on Iranian oil exports, and international oil prices have fallen to pre-Iran conflict levels. With navigation resuming, daily oil transport through the Strait of Hormuz has recovered to about 4.8 million barrels, and the move is expected to free up about 300,000 TEUs of container shipping capacity. This directly helps ease the previous tightness in container availability and space, and ocean freight rates may also fall.
Domestic monetary policy is also supporting. The central bank injected a net 200 billion yuan through expanded MLF operations to ensure reasonable liquidity. National Bureau of Statistics data shows that from January to May, total profits of industrial enterprises above designated size reached 3,143.96 billion yuan, up 18.8% year-on-year; profits in the textile industry grew 11.7%, demonstrating good development resilience. The improving macro environment provides some bottom support for the textile industry.
Where Is the Game Heading?
The core contradiction in the current cotton market is the tug-of-war between short-term weak demand and medium-to-long-term supply contraction expectations. Mills have low raw material inventories and are maintaining hand-to-mouth buying, which caps upside; but global weather uncertainty, domestic inventory destocking, and expectations of a year-on-year decline in new cotton production provide a solid floor.
The high domestic-import cotton price spread is the most noteworthy structural feature of the current market. At 3,140 yuan per ton, the cost advantage of imported cotton is extremely prominent, but quota restrictions prevent many mills from fully benefiting. For mills with quota access, the cost advantage is clear; for those relying on domestic cotton for the domestic market, cost pressure will persist.
Overall, the momentum for cotton prices to break out of their current range is insufficient in the short term. The demand side lacks seasonal support, and supply-side weather speculation has yet to materialize into actual production cuts. Both long and short positions need a new catalyst to break the deadlock.