Global cotton prices are undergoing a typical range-bound oscillation as supply and demand forces pull in opposite directions. Zhengzhou cotton futures main contract averaged 15,869 yuan/ton, down 0.2% week-on-week, while New York cotton futures closed at 77.55 cents/lb, a weekly drop of 1.2%. The domestic-international spread widened to 3,140 yuan/ton, with imported cotton costing 14,337 yuan/ton on a 1% tariff basis. These figures reveal a core reality: the market lacks momentum for a unilateral breakout, with neither bulls nor bears forming a decisive advantage.
The Price Anchor Under Dual Weakness
The central contradiction lies in the tug-of-war between short-term demand weakness and mid-to-long-term supply contraction expectations. On the demand side, the traditional off-season effect is significant, with mills maintaining low raw material inventories and only placing just-in-time purchases. Cotton yarn prices show divergence: domestic C32S combed yarn averaged 23,274 yuan/ton, up 9 yuan/ton week-on-week, while imported yarn held flat at 23,039 yuan/ton, with foreign yarn 235 yuan/ton cheaper than domestic. Polyester staple fiber fell 128 yuan/ton to 7,365 yuan/ton, with synthetic substitution further suppressing cotton demand.
Supply side shows regional divergence. The US drought has eased, with 2026/27 US cotton planting progress at 92%, but the good-to-excellent rate is only 44%, although up 9 percentage points year-on-year, still at low levels. India's cotton planting faces severe tests: as of this week, monsoon rainfall is about 43% below historical average, with forecasts suggesting continued weakness into early July. India's cotton output heavily depends on June-July monsoon precipitation; any sustained shortfall could materially impact new-season production.
Macro Variables and Industrial Transmission
The phased easing of the Middle East situation injects new variables. After the US-Iran memorandum of understanding, the Strait of Hormuz is temporarily open for 60 days, with daily oil transport recovering to about 4.8 million barrels, potentially releasing about 300,000 standard container capacity. For the textile industry, this means the earlier container shortage and tight space situation may ease, with ocean freight likely to fall, reducing imported cotton's landed cost. International oil prices have returned to pre-conflict levels, weakening synthetic fiber raw material support and indirectly affecting cotton-synthetic competition.
Domestic monetary policy continues to support. The central bank injected 200 billion yuan via increased MLF operations, ensuring reasonable liquidity, helping lower financing costs for textile enterprises. National Bureau of Statistics data shows January-May industrial profits above designated size grew 18.8% year-on-year, with textile industry profits up 11.7%, exceeding market expectations. However, profit growth comes more from cost control and product mix adjustments than strong demand pull.
Xinjiang Cotton Growth and Weather Risks
Domestic cotton enters a critical growth period, with Xinjiang's main production areas showing squaring rates of 94-95%, and some fields beginning sporadic flowering. National cotton growth is normal to slightly fast, but regional differentiation is clear: northern Xinjiang has better hydrothermal conditions with good growth; southern Xinjiang faces localized irrigation pressure due to periodic high temperatures and enhanced evapotranspiration. Inland cotton regions are mostly in squaring to early flowering stages, with generally stable growth. Currently, there is no systemic production risk, but attention must be paid to later high temperatures and irrigation conditions affecting yields.
Outlook and Operational Logic
Overall, the cotton market is intensifying its bull-bear battle. Demand is suppressed by the off-season and synthetic substitution, with mills only maintaining just-in-time purchases; supply is supported by global weather uncertainty, domestic inventory destocking, and expectations of lower new-crop output. In the short term, cotton prices will maintain range-bound oscillation. A breakout requires new catalysts: either a surprise demand recovery or a substantive supply cut signal.