In May 2026, domestic cotton prices experienced a notable surge followed by a retreat. The CCIndex 3128B hit a two-and-a-half-year high of 18,211 yuan/ton on May 7, but most gains were erased by month-end amid weak off-season demand and external market pressures.
Off-Season Effects and Slowing Chain Transmission
The traditional off-season for textiles began in May, with yarn output growth decelerating. National Bureau of Statistics data shows May yarn production at 1.869 million tons, down 1% month-on-month, with Xinjiang's output falling 3.6% to 319,000 tons. This slowdown directly reflects insufficient end-order demand.
Profit pressure is more concerning. While 32-count pure cotton yarn prices rose 795 yuan/ton to 23,277 yuan/ton, the increase lagged behind cotton's 3.6% monthly gain, squeezing mill margins. For buyers, the widening gap between raw material costs and finished product prices is a critical risk.
Export Recovery and Import Slowdown
Exports showed structural improvement. Textile and apparel exports reached $25.6 billion in May, up 6.5% month-on-month but down 2.3% year-on-year. Exports to the US and EU jumped 24.7% and 25.6% month-on-month, driven by progress in Sino-US trade talks and zero-tariff policies for Africa.
Imports cooled sharply. May cotton imports totaled only 113,000 tons, down 31.7% month-on-month, though still up 2.3 times year-on-year. Brazilian cotton accounted for 57.7%, while US cotton's share rose to 22.1%, reflecting further import concentration.
Inventory Signals
By end-May, commercial cotton stocks stood at 3.745 million tons, down 13.3% month-on-month but up 8.3% year-on-year. Industrial stocks fell 3.5% to 846,000 tons, down 10.1% year-on-year. Mills are maintaining just-in-time procurement, avoiding inventory buildup.
This inventory structure exerts dual pressure on prices: higher commercial stocks indicate ample supply elasticity, while low industrial stocks suggest lack of active restocking demand.
New Crop Uncertainty
China Cotton Association surveys show 99.5% of cotton planting was complete by end-May. However, seedling conditions deteriorated sharply—only 45.9% of surveyed farmers rated seedling quality as good or better than last year, a 34-percentage-point drop. Persistent rain in inland cotton regions caused waterlogging, delaying growth in the Yangtze River basin by 6.9 percentage points.
While Xinjiang planting is complete, localized heavy rain also affected seedlings. If weather doesn't improve, new-season output expectations may be revised down, providing support for cotton prices in H2.
Policy and Global Context
The new Xinjiang cotton target price policy was announced in late May, briefly boosting sentiment. The 2026 China Cotton Industry Development Summit in Chongqing, with nearly 400 attendees, focused on 'Change and Reconstruction' and launched a cotton product origin evaluation initiative.
However, the USDA's May report raised global production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons—all near record highs. The global supply glut means domestic prices can't decouple from overseas markets.