Cotton Market Breaches Key Psychological Level: When Will the Rebound Window Open Amid Weak Supply and Demand?

The cotton market has just suffered a psychological breakdown. Zhengzhou cotton futures' main contract fell below the 16,000 yuan/ton mark, closing at 15,905 yuan/ton, a daily decline of 105 yuan. The significance lies not in the absolute number, but in the breach of a key psychological barrier—once lost, market sentiment quickly shifts from wait-and-see to bearish, often amplifying selling pressure.

Domestic and External Co-movement: The Bearish Factors Are Not Isolated

This decline is no isolated incident. On June 23, China's commodity markets broadly weakened, with the cotton sector among the hardest hit. Simultaneously, ICE cotton futures fell to 78.59 cents/lb, down 1.03%. The synchronicity indicates global bearish drivers. Externally, three pressures converge: US cotton planting nears completion, raising expectations of ample new-crop supply; a stronger dollar depresses dollar-denominated commodity valuations; and global energy, grain, and financial assets weaken together, prompting capital outflows from cotton. These forces leave ICE cotton with little upward momentum in the near term.

Spot Market: Weak Demand Is the Heaviest Anchor

The spot side offers little solace. The domestic 3128B cotton price index stood at 17,631 yuan/ton, down just 1 yuan, but that stability masks extremely thin trading volumes. Downstream textile mills see order recovery falling short of expectations, with finished goods inventories piling up. Procurement has been reduced to "small, need-based replenishment," and bulk purchasing appetite has nearly vanished. Spot prices effectively lack real transaction support.

More telling is the imported cotton market. On June 24, port offers edged lower across the board. The international cotton price index for SM grade stood at 88.92 cents/lb, translating to a landed price of 14,961 yuan/ton; M grade was at 86.99 cents/lb, or 14,627 yuan/ton. M-grade fell more than SM-grade, indicating even weaker demand for mid-tier cotton. Although the domestic-import spread is narrowing, import attractiveness has not improved.

Conditions for a Rebound: Three Variables Define the Direction

Currently, the core logic suppressing cotton prices shows no signs of reversal. Yet the market is not without variables. Going forward, the industry must watch three factors: US cotton belt weather—the biggest supply-side risk; domestic textile orders—the key to demand recovery; and the RMB exchange rate—which could alter import cost dynamics.

Practical Recommendations

For Buyers - Maintain a need-based replenishment strategy and wait for clearer bottom signals. - Monitor the SM-M grade spread. If M-grade continues to fall faster, prioritize cost-effective mid-tier cotton. - When domestic-import spreads narrow, compare total landed costs including tariffs, logistics, and payment terms.

For Exporters - A stronger dollar boosts export revenues in RMB terms but raises import costs. Use forward contracts to hedge currency risk. - Foreign buyers may pressure prices after the external decline. Base quotes on actual procurement costs. - Watch US weather closely; extreme conditions could trigger a rapid external rebound, narrowing the import window.