China's cotton market staged a dramatic peak-and-retreat in May, with the CCIndex 3128B hitting a 2.5-year high of RMB 18,211/ton on May 7 before sliding back as off-season demand softened. The monthly average settled at RMB 17,789/ton, up 23.1% year-on-year and 3.6% month-on-month. The tug-of-war between seasonal weakness and policy support defined the month.
**Demand side: slowing output, shrinking margins**
National yarn output in May stood at 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month. Xinjiang output fell 3.6% month-on-month to 319,000 tons. The average price of 32s pure cotton yarn rose to RMB 23,277/ton, but the increase lagged behind cotton prices, squeezing mill margins. Mills turned cautious: industrial cotton inventory fell 3.5% month-on-month to 846,000 tons, down 10.1% year-on-year.
Exports showed sequential improvement. Textile and apparel exports reached $25.6 billion in May, up 6.5% month-on-month but down 2.3% year-on-year. Exports to the US and EU jumped 24.7% and 25.6% month-on-month respectively, while Belt and Road countries rose 9.7%. Interim US-China trade progress and China's zero-tariff policy for Africa supported the recovery.
**Supply side: import plunge and elevated stocks**
Cotton imports fell sharply to 113,000 tons in May, down 31.7% month-on-month. Brazil accounted for 57.7%, while US cotton share rebounded to 22.1%. January-May cumulative imports reached 825,000 tons, up 91% year-on-year.
Commercial stocks stood at 3.745 million tons at end-May, down 13.3% month-on-month but still 8.3% above last year's level. The USDA's May report raised global production to 26.702 million tons and ending stocks to 16.823 million tons, both at multi-year highs, capping bullish sentiment.
**New crop: area stable but seedlings lag**
Planting was 99.5% complete by end-May. However, only 45.9% of surveyed farmers rated seedling conditions as better or equal to last year, down 34 percentage points. Persistent rainfall in inland cotton areas caused waterlogging, delaying growth. Nationwide, 85.5% of cotton was at 4-8 true leaf stage, down 8.9 percentage points year-on-year. The risk of lower unit yields is rising.
**Policy and events**
The new Xinjiang cotton target price policy was announced in late May, providing a floor. The 2026 China Cotton Industry Development Summit in Chongqing attracted nearly 400 participants and launched a cotton product origin evaluation initiative, which could enhance the premium for domestic cotton.