Global cotton markets are in a delicate balance. During the week of June 22-26, domestic and international cotton prices traded in a weak range-bound pattern. The average settlement price of the Zhengzhou Cotton Futures main contract was 15,869 yuan/ton, down just 25 yuan/ton (0.2%) from the prior week. The International Cotton Index (M), representing import parity, averaged 86.37 cents/lb, up 0.51 cents/lb (0.6%). Behind these seemingly calm movements lies an intense tug-of-war between bulls and bears across supply and demand dimensions.
Supply Side: Weather Variables as Core Support
From the planting perspective, weather conditions in the world's two major producing regions form the primary support for current cotton prices. In the US, 2026/27 cotton planting has reached 92% completion, with the core Texas region at 90%, slightly ahead of last year's pace. However, the good-to-excellent crop rating stands at only 44%, though up 9 percentage points year-on-year, still indicating potential yield uncertainty during the critical growth phase.
India's situation is more severe. According to Indian Ministry of Agriculture data, monsoon rainfall as of this week was about 43% below the historical average, with meteorological departments predicting continued weak precipitation into early July. Cotton cultivation heavily depends on June-July monsoon rains; persistent deficits could materially impact next season's production. This weather risk is being priced into forward contracts, supporting the downside of international cotton prices.
Domestically, the main Xinjiang cotton region has a squaring rate of about 94-95%. Northern Xinjiang has favorable hydrothermal conditions, but southern Xinjiang faces localized irrigation pressure due to periodic high temperatures and enhanced evapotranspiration. Inland cotton regions are generally stable. Overall, there is no systemic production risk domestically, but subsequent high temperatures and irrigation conditions require close monitoring.
Demand Side: Off-Season and Substitution Effects
In contrast to supply-side tension, demand faces multiple pressures. Currently in the traditional textile off-season, downstream orders are weak, and spinners generally maintain hand-to-mouth purchasing with low raw material inventories. This week's C32S carded yarn average price was 23,274 yuan/ton, up just 9 yuan/ton from the prior week, reflecting sluggish yarn markets.
More critically, synthetic fiber substitution is strengthening. This week, polyester staple fiber prices fell 128 yuan/ton to 7,365 yuan/ton, widening the price gap with cotton. For cost-sensitive spinners, synthetic fibers' cost advantage is eroding cotton's rigid demand.
Additionally, short-term geopolitical benefits are fading. After the US-Iran memorandum of understanding, the Strait of Hormuz navigation is gradually recovering, with daily oil transport back to about 4.8 million barrels, potentially releasing about 300,000 TEUs of container capacity. International oil prices have fallen to pre-Iran-conflict levels, and ocean freight rates are expected to decline. This alleviates previous container shortages and space constraints while reducing imported cotton logistics costs, exerting downward pressure on cotton prices.
Domestic-International Price Spread: Structural Contradictions
This week, the domestic-international cotton price spread was 3,140 yuan/ton, narrowing 54 yuan/ton from the prior week but still at historically high levels. This spread structure clearly reflects the unique dilemma facing the domestic cotton market: domestic cotton prices are supported by policy stockpiling, new crop production reduction expectations, etc., showing relative resilience; while international cotton prices face global demand weakness and increased competition from substitutes.
The high spread means imported cotton still has a clear cost advantage, continuing to suppress domestic cotton consumption. For domestic spinners, using imported cotton can effectively reduce costs but faces quota restrictions and procurement timing challenges.