In May, domestic cotton prices experienced a brief surge followed by a rapid retreat. Although policy support triggered a small rebound at month-end, prices had already slid from their two-and-a-half-year high. CCIndex 3128B hit 18,211 yuan/ton on May 7 before falling to a monthly average of 17,789 yuan/ton, up only 3.6% from April. The core logic behind this reversal is straightforward: weak off-season demand and external pressure offset the short-term sentiment boost from policy news.
Full impact of the off-season
According to the National Bureau of Statistics, national yarn output in May was 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month. Xinjiang's yarn output was 319,000 tons, down 3.6% month-on-month. Although still up 18.6% year-on-year, the growth rate has clearly slowed. The average price of 32-count pure cotton yarn was 23,277 yuan/ton, up 795 yuan month-on-month, but the increase lagged far behind the rise in cotton raw material costs, further squeezing corporate profit margins.
The operating rate declined and raw material replenishment became cautious — this was the general state of textile enterprises in May. By the end of May, cotton industrial inventories stood at 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year, indicating limited acceptance of current cotton prices downstream. Commercial inventories of 3.745 million tons, though down 13.3% month-on-month, were still 8.3% higher than the same period last year, meaning destocking pressure has not been fully released.
Divergence between imports and exports
Cotton imports dropped sharply in May, with customs data showing only 113,000 tons imported, down 31.7% month-on-month. Brazilian cotton accounted for 57.7%, still in first place, while US cotton's share rebounded to 22.1%. The direct reason for the import plunge is weak purchasing willingness; insufficient orders during the off-season meant that the cost advantage of foreign cotton was no longer compelling. From January to May, cumulative imports reached 825,000 tons, up 91% year-on-year, but the growth rate has peaked and is now declining.
The export side tells a different story. Textile and apparel exports in May totaled $25.6 billion, up 6.5% month-on-month. Exports to the US and EU rose 24.7% and 25.6% month-on-month, respectively. The phased progress in China-US trade talks, the implementation of zero-tariff policies for Africa, and the narrowing tariff gap with Southeast Asia jointly drove order repatriation. However, cotton garment exports were $2.04 billion, still down 3.7% year-on-year, indicating that the recovery of pure cotton categories lags behind blended synthetic fibers.
New crop planting and seedling concerns
By the end of May, national cotton planting progress was 99.5%, essentially complete. However, persistent rainfall in inland cotton areas slowed progress: the Yangtze River basin was 6.9 percentage points behind last year, and the Yellow River basin 1.4 points behind. Only 45.9% of surveyed farmers rated seedling conditions as better than or equal to last year, a sharp drop of 34 percentage points. Localized waterlogging hindered seedling growth; 85.5% of national cotton was at the 4-8 true leaf stage, 8.9 percentage points lower than last year.
This implies uncertainty for the 2026/27 new crop output. While Xinjiang's cotton areas generally have suitable light and heat conditions, weak seedling conditions in inland areas could affect yields if weather does not improve. The China Cotton Association did not adjust its supply-demand balance sheet this month, but market concerns about the supply side have not dissipated.
Policy support vs. market reality
The new round of Xinjiang cotton target price policy landed in late May, briefly boosting market sentiment and causing a small price rebound. But the policy boost cannot offset structural weakness in demand. The USDA report raised the 2025/26 global production estimate to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons — all at high levels, with ongoing inventory pressure.
The domestic-international cotton price spread narrowed to 2,270 yuan/ton, 257 yuan narrower than the previous month, further weakening the price advantage of imported cotton. The Cotlook A index averaged 92 US cents/pound in May, equivalent to 15,518 yuan/ton after 1% tariff, 2,270 yuan lower than domestic prices. The narrowing spread means reduced impact from foreign cotton on the domestic market, but also reflects weak international demand.