The domestic cotton market is experiencing a deep tug-of-war between bullish and bearish forces. On one hand, the traditional textile off-season, compounded by the substitution effect of chemical fibers, continues to pressure demand. On the other hand, expectations of tightening global cotton supply, particularly weather risks in India, provide solid support for prices. This balancing act is clearly reflected in the latest weekly price data.
Price Signals: Narrow Fluctuations with Structural Divergence
Looking at specific figures, the average settlement price of the main Zhengzhou Cotton futures contract (CF1609) for this week was 15,869 yuan/ton, down 25 yuan/ton from the previous week, a decline of only 0.2%. In the spot market, the National Cotton Price B Index, representing standard-grade inland lint cotton, averaged 17,477 yuan/ton, up 30 yuan/ton week-on-week, a gain of 0.2%. This pattern of "futures slightly down, spot slightly up" suggests that the industrial side is more accepting of current prices than the financial side.
Internationally, the average settlement price of the main New York Cotton futures contract was 77.55 US cents per pound, down 1.2% week-on-week. In contrast, the International Cotton Index (M), representing the average CIF price of imported cotton at Chinese main ports, averaged 86.37 US cents per pound, up 0.6% week-on-week. Consequently, the domestic-foreign cotton price spread widened to 3,140 yuan/ton, narrowing by 54 yuan/ton from the previous week. This data signals to domestic mills that the cost advantage of imported cotton is diminishing.
Notably, cotton yarn and polyester staple fiber prices moved in opposite directions. Domestic C32S combed cotton yarn averaged 23,274 yuan/ton, up slightly by 9 yuan/ton week-on-week, while polyester staple fiber prices fell by 128 yuan/ton to 7,365 yuan/ton. The substitution effect of chemical fibers for cotton continues to strengthen at the price level, putting dual pressure on cotton textile enterprises in terms of market share and raw material costs.
Global Supply: Indian Weather Emerges as Key Variable
The core narrative in the global cotton market currently revolves around "supply tightening." According to the latest USDA data, planting progress for the 2026/27 U.S. cotton crop has reached 92%, with the core producing state of Texas at 90%. However, the good-to-excellent rating is only 44%, up 9 percentage points year-on-year but still at a relatively low level. This means that even with stable planted acreage, yield uncertainty remains.
The real risk focus is India. Indian Ministry of Agriculture data shows that as of this week, monsoon rainfall in India is about 43% below the historical average. Meteorological departments predict that rainfall will remain weak in early July. Indian cotton cultivation is highly dependent on monsoon precipitation from June to July. If rainfall continues to fall short, the new season's cotton output could face severe threats. Against the backdrop of already low global ending stocks, this psychological impact on the market cannot be underestimated.
Domestically, the squaring rate in Xinjiang's main production areas is approximately 94-95%, with some fields beginning to see sporadic flowering. National cotton growth progress is normal to slightly ahead, but regional differentiation is evident: northern Xinjiang has favorable hydrothermal conditions, while southern Xinjiang faces localized irrigation pressure due to periodic high temperatures and enhanced evapotranspiration. Currently, there is no systemic risk of production cuts, but the impact of later-stage high temperatures on yields requires continuous monitoring.
Demand Side: Off-Season Effect and Chemical Fiber Substitution
In contrast to the tension on the supply side, downstream demand is in a traditional off-season. Mills generally maintain low raw material inventories, adopting a "just-in-time" procurement strategy without significant restocking willingness. This behavior reflects two underlying logics: first, terminal orders are insufficient, making enterprises cautious about stockpiling; second, continuously falling chemical fiber prices prompt some blended spinning enterprises to actively adjust their formulas, reducing cotton usage.
At the macro level, data from the National Bureau of Statistics shows that from January to May, the total profit of industrial enterprises above a designated size increased by 18.8% year-on-year, with the textile industry's profit growing by 11.7%. Overall industry resilience remains, but profit growth stems more from cost control and product structure adjustments than from volume expansion. On the monetary policy front, the central bank injected a net 200 billion yuan through increased MLF operations, ensuring reasonable liquidity. This helps lower financing costs for textile enterprises but has limited direct impact on stimulating terminal demand.
Geopolitics and Logistics: Shipping Recovery as a Potential Bearish Factor
Recently, there has been a phased easing of tensions in the Middle East. The U.S. and Iran signed a memorandum of understanding, temporarily opening the Strait of Hormuz for 60 days. International oil prices have fallen back to pre-Iran-conflict levels, and shipping is gradually resuming. Daily oil transport volume has recovered to approximately 4.8 million barrels, with the potential to release about 300,000 standard containers of shipping capacity. This change has two implications for the textile industry: first, ocean freight rates are expected to decline, reducing logistics costs for imported cotton and exported finished goods; second, the easing of container shortages and tight capacity helps stabilize the rhythm of international trade.
However, it should be noted that the current opening is only a temporary 60-day arrangement, and geopolitical uncertainty has not been fundamentally eliminated. For coastal textile enterprises reliant on imported cotton, this is both a short-term positive and a reason to remain vigilant about the potential for renewed instability.