Domestic cotton prices exhibited a classic 'spot firm, futures weak' pattern last week. The average settlement price of the main Zhengzhou cotton futures contract was 15,869 yuan per ton, down 25 yuan from the previous week. In contrast, the China Cotton Price Index B, representing standard-grade inland lint, averaged 17,477 yuan per ton, up 30 yuan per week. The domestic-import spread remains high at 3,140 yuan per ton, giving imported cotton a significant cost advantage and pressuring domestic spot prices.
Industrial Impact
On the demand side, the textile market has entered the traditional off-season, with limited new orders and conservative purchasing strategies from mills. The domestic C32S carded yarn average price was 23,274 yuan per ton, up only 9 yuan from the previous week. Imported yarn from major sources averaged 23,039 yuan per ton, still 235 yuan cheaper than domestic yarn, continuing to erode the market share of local spinners. More notably, polyester staple fiber prices fell 128 yuan to 7,365 yuan per ton, enhancing the substitution effect against cotton and further weakening cotton consumption during the off-season. Mills are maintaining just-in-time purchasing, keeping raw material inventories low.
The supply side presents a complex picture. Global tightening expectations remain a key support for cotton prices. USDA data shows 2026/27 US cotton planting reached 92% by June 21, slightly ahead of last year, but the core Texas region is only at 90%. The good-to-excellent crop rating is just 44%, up 9 percentage points year-on-year but still low. In India, monsoon rainfall is about 43% below the historical average, with forecasts still weak for early July. Since Indian cotton planting heavily depends on June-July monsoon rains, a continued deficit could severely impact new crop production.
Domestic cotton is in a critical growth phase, with a squaring rate of 94-95% in Xinjiang's main production areas. Growth is generally normal to slightly ahead, but regional differences are clear: northern Xinjiang has favorable conditions, while southern Xinjiang faces irrigation pressure due to high temperatures. Inland cotton areas are mostly in the squaring to early flowering stage, with stable growth. While there is no systemic production risk yet, the impact of high temperatures and irrigation on yields needs close monitoring.
Macro-level signals are emerging. The Middle East situation has eased, with the US-Iran memorandum restoring Strait of Hormuz navigation to about 4.8 million barrels of oil per day, potentially releasing about 300,000 TEU of container capacity, easing shipping congestion and freight rates. Meanwhile, the central bank injected 200 billion yuan via MLF operations to ensure liquidity. National Bureau of Statistics data shows January-May industrial profits up 18.8% year-on-year, with textile profits up 11.7%, indicating industry resilience.
In summary, the cotton market is in a tug-of-war. Short-term demand weakness and synthetic fiber substitution are the main headwinds, while long-term weather uncertainty, inventory drawdowns, and expected production declines provide a solid floor. Without a clear directional catalyst, cotton prices are likely to remain range-bound.