Cotton prices remain trapped in a narrow range as weak demand clashes with tightening supply expectations. Zhengzhou cotton futures averaged 15,869 yuan/ton, down 0.2% week-on-week, while the China Cotton Index (B) stood at 17,477 yuan/ton, up 0.2%. The domestic-import spread remains high at 3,140 yuan/ton, favoring imported cotton.
Policy and Macro: Liquidity Injection Meets Geopolitical Easing
The central bank injected 200 billion yuan via medium-term lending facility, signaling strong liquidity support. This directly lowers financing costs for capital markets. National Bureau of Statistics data shows industrial profits grew 18.8% in the first five months, with textile profits up 11.7%, highlighting industry resilience.
Internationally, the US-Iran memorandum eased tensions in the Strait of Hormuz, with daily oil shipments recovering to 4.8 million barrels and releasing about 300,000 TEUs of container capacity. This points to lower freight rates ahead, benefiting textile firms that rely on imported cotton and export garments.
Supply: US Planting Progresses, India Faces Monsoon Risk
USDA data shows 92% of the 2026/27 US cotton crop is planted, with Texas at 90%. However, the good-to-excellent rating is only 44%, up 9 percentage points year-on-year but still low, leaving yield vulnerable to weather.
India's situation is more critical. The India Meteorological Department reports monsoon rainfall 43% below the historical average. Cotton planting heavily depends on June-July rains; continued deficits could severely impact new crop output. This is a key support for international cotton prices.
Domestically, Chinese cotton enters a critical growth phase. Xinjiang's squaring rate is 94-95%, with local flowering beginning. Regional divergence is clear: northern Xinjiang has favorable conditions, while southern Xinjiang faces irrigation stress due to high temperatures. The inland cotton areas are generally stable. No systemic production risk exists yet, but high temperatures and irrigation will determine final yields.
Demand: Off-Season and Synthetic Substitution Weigh
The domestic textile market is in its traditional off-season. Mills maintain low raw material inventories and buy only for immediate needs. Cotton yarn prices are weak, with C32S combed yarn averaging 23,274 yuan/ton, up just 9 yuan/ton. Polyester staple fiber fell 128 yuan/ton to 7,365 yuan/ton, enhancing its substitution appeal. Imported yarn is 235 yuan/ton cheaper than domestic yarn, pressuring local spinners.
Overall, the tug-of-war between short-term weak demand and long-term supply tightening continues. Policy liquidity and geopolitical easing provide a floor, but off-season demand and synthetic substitution cap upside. Cotton prices are expected to remain range-bound until a new catalyst emerges.