In May 2026, China's cotton market experienced a sharp rally followed by a correction. The CCIndex 3128B hit a 2.5-year high of 18,211 yuan/ton on May 7, but then retreated as seasonal weakness in textile demand took hold. The month ended with prices oscillating at elevated levels, reflecting a tug-of-war between policy optimism and demand-side headwinds.
Seasonal Slowdown Hits Production
May marks the traditional off-season for textiles. National yarn output stood at 1.869 million tons, up just 2.7% year-on-year and down 1% month-on-month. Even Xinjiang, the powerhouse region, saw a 3.6% sequential decline despite 18.6% annual growth. More telling is the margin squeeze: 32-count pure cotton yarn averaged 23,277 yuan/ton, up 795 yuan from April, but the gain lagged far behind cotton price increases.
Mill operating rates fell, finished goods inventories accumulated, and mills turned cautious on raw material procurement. Industrial cotton stocks dropped to 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. Commercial stocks reached 3.745 million tons, down 13.3% from April but still 8.3% above last year's level, indicating lingering destocking pressure.
Exports Recover with Structural Shifts
Textile and apparel exports hit $25.6 billion in May, up 6.5% month-on-month. Exports to the US and EU surged 24.7% and 25.6% respectively, while Belt and Road countries posted a 9.7% sequential gain. The US-China trade talks progress and zero-tariff policy for African nations provided dual support.
However, year-on-year figures remained negative: May exports fell 2.3%, and cumulative January-May exports edged up only 0.1%. Cotton garment exports dropped 3.7% year-on-year to $2.04 billion, highlighting shrinking cotton share in export mix. Overseas buyers face a 'volume up, profit down' dilemma.
Imports Plunge, Brazil Dominates
May cotton imports tumbled 31.7% month-on-month to just 113,000 tons, though still up 2.3 times year-on-year due to a low base. Brazil's share surged to 57.7%, while US cotton rebounded to 22.1%. January-May cumulative imports reached 825,000 tons, up 91% year-on-year, likely pushing annual imports to a multi-year high.
The USDA May report raised 2025/26 global cotton production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons — all at recent highs. This suggests a still-loose global supply-demand balance, capping upside for domestic prices.
Price Gap Narrows, Crop Concerns Emerge
The Cotlook A index averaged 92 US cents/lb in May. After applying the 1% tariff, the import price was 2,270 yuan/ton below domestic cotton, narrowing the gap by 257 yuan. A narrower gap helps curb import appetite, but domestic price sustainability hinges on demand recovery.
On the supply side, national cotton planting was 99.5% complete. But seedling conditions deteriorated: only 45.9% of surveyed farmers rated seedlings better than last year, down 34 percentage points. Heavy rains in inland cotton regions caused waterlogging, delaying growth. This could affect new crop quality and yield expectations.
Policy Support vs. Market Reality
Late May saw the rollout of a new round of Xinjiang cotton target price policy, briefly boosting sentiment. But whether policy stimulus translates into sustained demand depends on end-consumer transmission. The China Cotton Association left its May supply-demand balance sheet unchanged, reflecting market uncertainty.
The 2026 China Cotton Industry Development Summit Forum in Chongqing drew nearly 400 delegates discussing 'Transformation and Restructuring.' The launch of a cotton product origin evaluation program could provide a new differentiation tool for domestic cotton.