Domestic cotton prices hovered around 15,800 yuan/ton, while international prices fluctuated near 77 cents/lb—this was the reality of the cotton market in the last week of June. The Zhengzhou cotton futures main contract averaged 15,869 yuan/ton, down 0.2% week-on-week, while the international cotton index (M) averaged 86.37 cents/lb, equivalent to 14,337 yuan/ton, leaving a domestic-import price gap of 3,140 yuan/ton. This means domestic cotton has no price advantage, but downstream spinners have not flocked to import alternatives.
Supply Side: Dual Variables of Weather and Policy
The expectation of tightening global supply is not unfounded. India's latest data shows monsoon rainfall is 43% below the historical average, and the country's cotton planting heavily depends on June-July precipitation. The meteorological department predicts weak rainfall in early July, threatening new crop output. Meanwhile, USDA data shows US cotton planting at 92% completion, but the good-to-excellent rate in Texas is only 44%, still low despite a 9-percentage-point year-on-year improvement.
Domestically, Xinjiang's main producing areas show a squaring rate of 94-95%, with some fields beginning to flower. But regional divergence is clear: northern Xinjiang has better hydrothermal conditions, while southern Xinjiang faces irrigation pressure due to high temperatures and evapotranspiration. Overall, there is no systemic production risk, but the impact of high temperatures and irrigation on yields needs monitoring.
Notably, the Middle East situation has eased temporarily. After the US-Iran memorandum of understanding, the Strait of Hormuz is open for 60 days, with daily oil shipments recovered to about 4.8 million barrels, potentially releasing 300,000 TEUs of shipping capacity. This suppresses the ocean freight that surged due to the Red Sea crisis, indirectly lowering imported cotton costs. International oil prices have fallen to pre-crisis levels, weakening the cost support for chemical fiber substitutes—polyester staple fiber prices fell 128 yuan/ton to 7,365 yuan/ton.
Demand Side: Off-Season Effect and Chemical Fiber Substitution
The domestic textile market is in its traditional off-season. Spinners hold low raw material inventories but show weak purchasing intent, only replenishing for immediate needs. C32S combed yarn averaged 23,274 yuan/ton, up slightly by 9 yuan/ton, but imported yarn averaged 23,039 yuan/ton, with a gap of only 235 yuan/ton, making domestic yarn uncompetitive. Falling polyester prices further strengthen chemical fiber's substitution for cotton, pressuring cotton prices.
Macroeconomic policies are releasing dividends. The central bank injected 200 billion yuan via MLF operations to ensure ample liquidity. National Bureau of Statistics data shows industrial profits above designated size grew 18.8% year-on-year in January-May, with textile industry profits up 11.7%. This means textile enterprises' profitability is improving, but it hasn't translated into active raw material purchasing, reflecting cautious sentiment.
Outlook: Stalemate Unlikely to Break Soon
In summary, the cotton market is stuck in a tug-of-war. Demand is suppressed by the off-season and chemical fiber substitution, while supply is supported by global weather uncertainty, domestic destocking, and expected new crop output decline. In the short term, prices will likely remain range-bound. But two variables deserve attention: first, the evolution of India's monsoon—if deficits persist, it could trigger a supply-side breakout; second, when the domestic off-season ends—if demand recovers in September coupled with a supply gap before new crop arrival, cotton prices could gain upward momentum.
For buyers and foreign trade companies, the core strategy is to manage uncertainty rather than bet on a single direction.