In May, domestic cotton prices experienced a sharp rise followed by a fall, with the CCIndex 3128B dropping nearly 400 yuan per ton from its monthly high. Globally, the USDA raised 2025/26 production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all near historical highs. The interplay of tightening domestic supply and easing global fundamentals has left the cotton market in an uncertain trading range.
Off-Season Effect Slows Mill Procurement
National Bureau of Statistics data show May yarn output at 1.869 million tons, up 2.7% year-on-year but down 1% month-on-month. Xinjiang's output fell 3.6% month-on-month to 319,000 tons. Slower yarn growth translated into cautious raw material buying: May cotton imports were only 113,000 tons, down 31.7% month-on-month, though still up 2.3 times year-on-year. Mills shifted to small, opportunistic replenishment.
Commercial stocks fell 13.3% month-on-month to 3.745 million tons but remained 8.3% above last year. Industrial stocks dropped 3.5% to 846,000 tons, down 10.1% year-on-year. The destocking reflects mills' resistance to high cotton prices, as 32s combed yarn averaged 23,277 yuan/ton, up 795 yuan, but the gain lagged cotton, squeezing margins.
For downstream buyers, cost pass-through ability, not stockpiling, is now the priority. If cotton stays high, profit recovery for fabric and apparel orders will become more difficult.
Global Supply Glut Persists, Price Gap Narrows
The USDA's May report raised 2025/26 global output to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, leaving a production-consumption surplus of just 546,000 tons. The stock-to-use ratio hit 64.3%, capping international price upside.
The Cotlook A index averaged 92 US cents/lb, up 6.5% month-on-month, but later fell on a strong dollar and weak US exports. After converting at the 1% tariff rate, international cotton was 2,270 yuan/ton cheaper than domestic, narrowing the gap by 257 yuan. Brazilian cotton still dominated imports at 57.7%, with US cotton recovering to 22.1%, but overall buying slowed.
For traders, the narrowing price gap reduces the appeal of imports. If domestic prices continue to correct, spot domestic purchases may become more attractive.
Regional Seedling Divergence: Xinjiang Stable, Inland Under Pressure
By end-May, national cotton planting progress reached 99.5%, with Xinjiang fully planted. However, persistent rain in inland areas caused waterlogging: the Yellow River region was 95.6% planted, 1.4 percentage points behind last year; the Yangtze River region was 99.3% planted, 6.9 points behind. Seedling conditions deteriorated: only 45.9% of surveyed households rated seedlings better than last year, a 34-point drop. 85.5% of cotton was at the 4-8 true-leaf stage, down 8.9 points.
Xinjiang's overall light and heat conditions are favorable, with some fields entering the squaring stage. But inland yields may be revised down if waterlogging persists, increasing reliance on Xinjiang cotton and supporting a floor under domestic prices.
Exports Recover Month-on-Month Led by US and EU
Customs data show May textile and apparel exports at $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Cumulative January-May exports were $116.73 billion, up 0.1% year-on-year. Notably, exports to the US and EU surged 24.7% and 25.6% month-on-month, far outpacing the 9.7% growth to Belt and Road countries. The interim US-China trade deal and zero-tariff policy for Africa drove order recovery.
However, cotton garment exports were only $2.04 billion, down 3.7% year-on-year and up 11.9% month-on-month—slower than the overall recovery. High cotton prices are hurting competitiveness, likely accelerating substitution by synthetics.