In May, domestic cotton prices experienced a rollercoaster—surged to a two-and-a-half-year high of 18,211 yuan/ton on May 7, then retreated due to off-season demand weakness and external market declines. The month-average of 17,789 yuan/ton still marked a 23.1% year-on-year increase. The core tension lies between policy support and sluggish demand.
Supply-Side Pressure Persists
National Bureau of Statistics data shows May yarn output 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. Commercial cotton inventories reached 3.745 million tons at end-May, still 8.3% higher year-on-year, while industrial inventories fell 10.1%, indicating mills are buying hand-to-mouth. Cotton imports plunged 31.7% month-on-month to just 113,000 tons, with Brazil accounting for 57.7% and US cotton 22.1%. The import concentration trend warrants attention from buyers.
Export Recovery but Margin Squeeze
Textile and apparel exports totaled 25.6 billion USD in May, up 6.5% month-on-month, with exports to the US and EU rising 24.7% and 25.6% respectively. However, January-May cumulative growth was only 0.1%, suggesting fragile recovery. The 32-count pure cotton yarn average price of 23,277 yuan/ton rose only 3.5% month-on-month, far below cotton's 23.1% increase, severely compressing mill margins.
Narrowing Price Gap with Imports
The Cotlook A index averaged 92 US cents/lb, equivalent to 15,518 yuan/ton after 1% tariff, 2,270 yuan lower than domestic cotton. The gap narrowed by 257 yuan month-on-month, reducing import cotton's cost advantage. The USDA raised 2025/26 global output to 26.702 million tons and consumption to 26.156 million tons, with ending stocks at 16.823 million tons—global oversupply caps international upside.
Weak Seedling Conditions
By end-May, national cotton planting progress was 99.5%, 0.2 percentage points slower than last year. The Yangtze River region lagged by 6.9 percentage points due to persistent rain and waterlogging. Only 45.9% of surveyed farmers rated seedlings better than last year, a 34-percentage-point decline. Adverse weather could lower new-crop yield expectations.
Policy Signals from 2026 Summit
The 2026 China Cotton Industry Development Summit (May 28-29, Chongqing) drew 400 delegates. The 'Transformation and Reconstruction' theme and the launch of cotton product origin evaluation signal rising traceability requirements, potentially increasing compliance costs for supply chains.