The US cotton good-to-excellent rate dropped 5 percentage points in a single week, from 53% to 48%, triggering a notable reaction in the Zhengzhou Cotton Futures market. On June 29, the main contract 2609 closed at 16,070 yuan/ton, up 210 yuan/ton from the previous trading day, with high trading volume and open interest. This is not a routine weekly fluctuation but a signal that supply-side contraction expectations are materializing into reality.
What the Drop in Good-to-Excellent Rate Means
The USDA's weekly crop progress report shows that for the week ending June 28, the US cotton good-to-excellent rate stood at only 48%, below both the previous week's 53% and last year's 51%. During the critical growth period, consecutive declines in this metric typically indicate impaired yield potential. Planting progress reached 97%, slightly above last year's 95% and in line with the five-year average, suggesting no significant delays during the planting window. However, squaring at 37% and boll setting at 9% are close to the five-year averages, meaning plant development is on schedule, but plant health is the issue.
Historically, when the good-to-excellent rate falls below 50%, final yields tend to be 2%-5% below trend. If the rate continues to decline in coming weeks, market expectations for the 2026/27 US cotton crop will shift from optimistic to cautious. This is a signal for the global cotton supply chain to reassess pricing.
Immediate Reaction and Transmission Logic of Zhengzhou Cotton Futures
The main Zhengzhou Cotton contract 2609 rose 1.32% on June 29, gaining 210 yuan/ton, typical of a supply shock rally. Open interest expanded concurrently, indicating long capital actively entering the market rather than short covering. This structure suggests the market believes current prices have not fully priced in the output reduction expectation, leaving room for further upside.
For domestic textile mills, the futures price increase directly raises the cost of point-price procurement. The current Zhengzhou Cotton price of 16,070 yuan/ton has narrowed the basis for Xinjiang cotton spot from -200 yuan/ton to around -100 yuan/ton. If the US cotton good-to-excellent rate continues to deteriorate, the domestic-foreign price spread may widen further, reducing the cost advantage of imported cotton and affecting the raw material blending strategies of downstream yarn mills.
Transmission Effects on Industrial Clusters
The supply contraction expectation first transmits to imported cotton traders and large spinning mills. Industrial clusters in Shandong, Jiangsu, and Henan, which rely heavily on imported cotton, have seen a notable increase in inquiries and hedging activities. Some traders have already raised their basis quotes for US cotton, while Xinjiang cotton, with ample domestic supply, has shown limited follow-through gains.
From a product category perspective, high-count and combed yarns, which have a higher dependency on US cotton, will feel the cost pressure first. If futures prices remain above 16,000 yuan/ton, downstream weaving and apparel companies may face a new round of raw material cost pass-through. However, current domestic cotton commercial inventories are still at historically high levels for this time of year, which partially cushions the impact of external volatility on domestic spot prices.
Key Nodes to Watch
First, weather conditions in the main US cotton-producing regions in July-August. Drought severity in West Texas will directly affect the speed of good-to-excellent rate recovery. Second, the upcoming USDA monthly supply-demand report, where the first official estimate of US cotton production will provide a clear benchmark for the market. Third, changes in Zhengzhou Cotton open interest; if it continues to increase while prices break through 16,500 yuan/ton, more hedging activity may be triggered.
For each link in the textile supply chain, the core contradiction has shifted from 'whether demand will recover' to 'how much supply will contract.' This means price volatility will increase, requiring more flexible procurement rhythm and inventory management.