The off-season effect fully materialized in China's cotton market in May. Domestic prices hit a 2.5-year high on May 7 but quickly retreated as order shrinkage and inventory pressure weighed. The monthly average CCIndex 3128B settled at 17,789 yuan/ton, up only 3.6% month-on-month. The domestic-international price gap narrowed to 2,270 yuan/ton, but international prices remained suppressed by a strong dollar and weak US cotton exports, with the Cotlook A index averaging 92 US cents/lb.
Supply-Demand: Dual Pressure from Higher Output and High Inventories
The global cotton supply-demand balance is tilting toward looser conditions. The USDA May report raised 2025/26 global output to 26.702 million tons, while consumption rose to 26.156 million tons. However, ending stocks still increased to 16.823 million tons, all at multi-year highs. Domestically, commercial stocks stood at 3.745 million tons in May, down 13.3% month-on-month but up 8.3% year-on-year. Industrial stocks fell 3.5% to 846,000 tons, reflecting cautious restocking behavior.
Chain Transmission: Yarn Margins Squeezed, Export Recovery Shows Structure
Yarn prices lagged behind cotton gains. The average 32s pure cotton yarn price was 23,277 yuan/ton, up 3.5% month-on-month, far below cotton's 3.6% increase. National yarn output reached 1.869 million tons, up 2.7% year-on-year but down 1% month-on-month. Exports showed structural improvement: total textile and apparel exports hit $25.6 billion, up 6.5% month-on-month, though still down 2.3% year-on-year. Exports to the US and EU grew 24.7% and 25.6% month-on-month, respectively.
Imports: Brazilian Cotton Dominates, US Share Rebounds
Cotton imports plunged 31.7% month-on-month to 113,000 tons in May, though still up 2.3 times year-on-year. Brazilian cotton accounted for 57.7%, while US cotton's share recovered to 22.1%. Cumulative imports for January-May reached 825,000 tons, up 91% year-on-year, driven by persistent price advantages of foreign cotton.
Production Regions: Xinjiang Planting Complete, Inland Seedlings Worry
National cotton planting progress reached 99.5% by end-May, with Xinjiang fully completed. However, persistent rainfall in inland regions slowed progress: the Yellow River basin was 95.6% complete (down 1.4 pp year-on-year), and the Yangtze basin was 99.3% complete (down 6.9 pp). Only 45.9% of surveyed farmers rated seedling conditions as better or equal to last year, a 34 pp drop. Waterlogging delayed growth, with 85.5% of cotton at the 4-8 true leaf stage, down 8.9 pp year-on-year.