Domestic cotton prices are experiencing a classic "ceiling above, floor below" market. Zhengzhou cotton futures main contract averaged 15,869 yuan/ton, down 0.2% weekly, while the China Cotton Price Index B edged up to 17,477 yuan/ton. The divergence reflects differing views between spot and futures markets on future expectations. The domestic-import price spread remains high at 3,140 yuan/ton, with imported cotton costing only 14,337 yuan/ton, offering clear price advantages, yet mills show limited buying interest.
Supply Side: Global Weather Disruptions Continue to Brew
The expectation of tightening global cotton supply remains the most solid support for current cotton prices. India's cotton planting season faces severe challenges—monsoon rainfall to date is about 43% below the historical average, and meteorological departments predict weak rainfall into early July. India's cotton output heavily depends on June-July monsoon precipitation; if rains remain insufficient, next season's production could be severely impacted. In the US, 2026/27 cotton planting has reached 92%, with Texas at 90%, but the good-to-excellent rate stands at only 44%, though up 9 percentage points year-on-year, still at a low level. In China's Xinjiang, cotton squaring rate is about 94-95%. Northern Xinjiang has favorable hydrothermal conditions, while parts of southern Xinjiang face periodic high temperatures and irrigation pressure. Overall, there is no systemic production risk yet, but regional divergence is clear, leaving later yields uncertain.
Demand Side: Off-Season Effect and Fiber Substitution
Domestic textile market is in a traditional off-season, with limited end-user orders. Mills maintain low raw material inventories and buy only as needed. C32S combed yarn averaged 23,274 yuan/ton, up only 9 yuan/ton weekly, with imported yarn flat at 23,039 yuan/ton. The domestic-import yarn spread is inverted at -235 yuan/ton, giving domestic yarn a competitive edge, but downstream weaving mills show little stocking appetite. Of greater concern is the substitution effect from man-made fibers—polyester staple fiber prices fell 128 yuan/ton to 7,365 yuan/ton, widening the gap with cotton and prompting some mills to increase polyester usage in blended products, directly squeezing cotton demand. National Bureau of Statistics data show textile industry profits grew 11.7% year-on-year in the first five months, showing industry resilience, but profit growth comes more from cost control and product mix adjustments than demand expansion.
Macroeconomics and Logistics: Temporary Relief but Uncertainty Lingers
The Middle East situation shows signs of a temporary détente: the US and Iran signed a memorandum of understanding, reopening the Strait of Hormuz for 60 days. Daily oil transit has recovered to about 4.8 million barrels, potentially freeing up approximately 300,000 standard containers of shipping capacity. This puts downward pressure on previously high freight rates, potentially lowering logistics costs for textile raw material imports. Domestically, monetary policy continues to ease, with the central bank injecting 200 billion yuan via MLF operations, reducing capital market financing costs and indirectly benefiting textile enterprises' cash flow. However, the transmission of policy dividends to real demand takes time and is unlikely to reverse the off-season weakness in the short term.
Range-Bound Volatility to Persist Amid Bull-Bear Battle
The core contradiction in the cotton market is the tug-of-war between short-term weak demand and medium-term supply contraction expectations. On the demand side, pressures from the off-season, fiber substitution, and foreign yarn competition keep mills' procurement strategies conservative. On the supply side, support comes from global weather uncertainty, domestic inventory drawdown, and expectations of lower new-crop output. In the short term, cotton prices are expected to remain range-bound, lacking sufficient momentum to break out on either side. For industry participants, the current spread structure offers hedging and basis trading opportunities, but caution is warranted regarding sudden variables like changes in Indian monsoon patterns or US growing region weather.