In the first half of 2026, Zhengzhou Cotton futures rose from around 14,600 yuan per ton at the start of the year to nearly 17,000 yuan in early May, driven by expectations of reduced planting area, a tightening global supply-demand balance, and rigid demand from textile capacity expansion. However, as the traditional consumption off-season set in and downstream negative feedback accumulated, prices retreated, with the half-year gain narrowing to 10.25%. This trajectory reflects a tug-of-war between tightening supply and weakening demand.
Inventory Drawdown and Import Surge
Commercial inventory data confirmed the阶段性 tightness in H1. After peaking at 5.698 million tons in January with the arrival of new cotton, stocks entered a five-month drawdown, falling to 3.124 million tons by end-June, a 41% reduction. The stock structure showed a divergence: tight in Xinjiang (1.944 million tons) but ample at ports (600,000 tons).
Imports surged to fill the supply gap. From January to May, China imported about 826,000 tons of cotton, up 89% year-on-year. Brazilian cotton dominated with 500,000 tons, accounting for 60% of total imports, and its share exceeded 70% in February. US cotton imports were around 90,000 tons, or 11%. The high start and gradual decline in imports reflect a shift from concentrated restocking to cautious buying.
Planting Area and Weather Risks
Market expectations of a sharp reduction in planting area did not fully materialize. Despite意向 area falling from 44.38 million mu to 43.12 million mu, actual planted area reached 46.32 million mu, down only 3.1% year-on-year, significantly less than the 8-10% decline anticipated. Xinjiang planted 41.535 million mu, down 3.4%, due to policy-driven withdrawal from non-cotton areas; inland areas planted 4.568 million mu, down 0.2%. The extension of the 18,600 yuan/ton subsidy to 2028 boosted farmers' willingness to expand.
Currently, most cotton in Xinjiang is in the flowering stage, but sustained high temperatures pose risks, with local temperatures exceeding 40°C. Areas like Bazhou, Turpan, and Hami face high heat stress. In the Yangtze River basin, excessive rain and insufficient sunlight hinder growth. Yield uncertainty will become clearer by mid-to-late July, serving as a key price driver in H2.
Mill Operating Rates and Downstream Transmission
Mill operating rates in H1 showed a pattern of peak in peak season and gradual decline in off-season. During the golden March-April period, rates hit a half-year high of 78.6% in late March, but then fell as cotton prices outpaced yarn prices, squeezing inland mills' margins. From May, orders dwindled, yarn and fabric inventories rose, and operating rates dropped to 74.2% by end-June. Large mills maintained full orders while small and medium enterprises struggled, highlighting industry divergence.
In H2, July-August remains the off-season, with inventory drawdown slowing. New cotton will enter the market in September-October, rapidly replenishing stocks. Whether the golden September-October season can boost rates again depends on autumn/winter order placement and the realization of crop reduction expectations.
Tight Balance in H2
Looking ahead, the domestic cotton market will face a tight supply-demand balance. Q3 is a transition period between old and new crops, with limited spot availability supporting prices. However, weak seasonal demand and downstream inventory pressure will cap upside. In Q4, the autumn/winter peak season, coupled with Xinjiang's expanding textile capacity, is expected to boost raw material restocking and drive prices higher.
Risks include macro currency fluctuations, weaker-than-expected order recovery, and policy adjustments.