Cotton prices are locked in a classic tug-of-war between supply-side expectations and demand-side weakness. In the last week of June 2026, Zhengzhou cotton futures averaged 15,869 yuan/ton, down just 25 yuan/ton week-on-week. In contrast, New York cotton futures fell 0.96 cents/lb to 77.55 cents/lb, a 1.2% decline, significantly outpacing the domestic market. On the spot market, domestic standard-grade cotton averaged 17,477 yuan/ton, up 30 yuan/ton, while the international cotton index (M) averaged 86.37 cents/lb, translating to an import cost of 14,337 yuan/ton. The domestic-import price spread remained wide at 3,140 yuan/ton.
Supply: Weather Uncertainty Dominates
India's deficient monsoon rainfall is the most sensitive nerve in the global cotton market. As of late June, rainfall was 43% below the historical average, and cotton planting heavily depends on June-July precipitation. With forecasts suggesting weak rains into early July, a sustained shortfall could severely threaten India's new-crop output, providing a floor under international prices.
In the U.S., 2026/27 cotton planting reached 92% completion, with Texas at 90%. However, the crop condition rating of 44% good-to-excellent, while up 9 percentage points year-on-year, remains low. Drought stress has eased but not disappeared.
Domestically, China's cotton is in a critical growth phase. In Xinjiang, squaring rates hit 94-95%, with overall growth normal to slightly fast. However, regional divergence is evident: northern Xinjiang enjoys favorable moisture and heat, while southern Xinjiang faces irrigation pressure from high temperatures. Inland cotton areas are stable. No systemic yield risk exists yet, but late-season heat and irrigation conditions warrant close monitoring.
Demand: Off-Season Blues and Substitution Pressure
Downstream textile mills are in the traditional off-season. Cotton yarn prices are weak: domestic C32S combed yarn averaged 23,274 yuan/ton, up just 9 yuan/ton, while imported yarn was flat at 23,039 yuan/ton, 235 yuan/ton cheaper than domestic. More notably, polyester staple fiber prices fell 128 yuan/ton to 7,365 yuan/ton, intensifying substitution pressure on cotton.
Mills maintain low raw material inventories and procure only for immediate needs. This means inventory pressure falls on ginners and traders rather than being passed downstream. The combination of inelastic demand and elastic supply makes it difficult for prices to break higher during the off-season.
Macro Factors: Shipping Costs and Policy Support
Middle East tensions have eased. After the U.S.-Iran memorandum of understanding, Strait of Hormuz traffic recovered to about 4.8 million barrels per day. Analysts estimate up to 300,000 TEUs of container capacity could be freed, alleviating container shortages and high freight rates—a potential positive for mills relying on imported cotton.
Domestically, the central bank injected 200 billion yuan via MLF operations to ensure ample liquidity. National Bureau of Statistics data shows industrial profits rose 18.8% year-on-year in Jan-May, with textile industry profits up 11.7%, demonstrating resilience despite weak short-term demand.
Near-Term Outlook: Range-Bound Persistence
The market remains a tug-of-war: demand is suppressed by the off-season and polyester substitution, while supply is supported by weather uncertainty, domestic destocking, and expectations of lower new-crop output. With short-term weakness clashing with medium-term supply contraction, prices are likely to stay range-bound.
For buyers, current levels are not a trend inflection point. Avoid chasing rallies or selling into dips. Lock in forward contracts based on order books, and watch India's monsoon progress and China's new-crop growth data as decision anchors.