In early July, a subtle signal emerged in the cotton spot market: Zhengzhou Cotton Futures rebounded with volatility, but downstream production and sales weakened. Some cotton enterprises chose to slightly lower their basis by 20-30 yuan/ton in an attempt to stimulate transactions. However, the actual effect was limited, as spinners and traders became more cautious, and the price cuts did not lead to the expected volume increase.
Basis Adjustment and Procurement Divergence
This round of basis adjustment was primarily driven by small and medium-sized traders, while the quotation systems of large-scale cotton enterprises remained relatively stable. According to quotes from July 1-3, the basis for southern Xinjiang 3129B/3130B grade cotton in inland warehouses ranged from 1,520 to 1,810 yuan/ton (including warehouse receipts), while the basis for northern Xinjiang resources of the same grade reached as high as 1,820 to 2,050 yuan/ton. The spread between the two widened to 200-400 yuan/ton, directly altering the procurement strategies of cotton-consuming enterprises.
Currently, inland spinners are clearly shifting their inquiry and purchasing focus toward southern and eastern Xinjiang resources. Low-basis cotton from Kashgar, Kizilsu, Hotan in southern Xinjiang, and Hami in eastern Xinjiang has attracted more attention. Meanwhile, the 'fixed-price' competitive trading sessions launched by some large and medium-sized cotton enterprises have become an important supplementary channel for rigid demand replenishment, bypassing basis negotiation games and appealing more to companies in urgent need of spot goods.
Accelerated Warehouse Receipt Outflow and Supply-Demand Logic
Warehouse receipt data better reflects the market's true temperature. According to statistics, from June 26 to July 2, the daily reductions in Zhengzhou Cotton Exchange warehouse receipts plus effective forecasts were 74, 73, 49, 55, and 62 lots respectively, significantly faster than the outflow pace in mid-June. This indicates that more spinners and traders are choosing to take delivery of warehouse receipts rather than continuing to wait in the spot market.
Three driving factors are behind this: first, the basis for spot cotton in Xinjiang warehouses remains high, making warehouse receipts more cost-effective for some companies; second, there is a growing consensus that supply of high-quality cotton (such as 'double 29/double 30/double 31') will tighten before the 2026/27 new crop arrives; third, expectations of a shortage in cotton import quotas for the second half of the year are becoming clearer, prompting companies to lock in domestic resources early.
Transmission Effects Upstream and Downstream
The loosening of basis and accelerated outflow of warehouse receipts are reshaping the short-term game pattern in the cotton industry chain. For upstream ginners and traders, the fact that lowering the basis failed to effectively activate demand suggests that current cotton prices have not yet reached the psychological threshold of downstream buyers, and greater destocking pressure may lie ahead. Northern Xinjiang resources, in particular, are seeing sluggish transactions due to higher basis, increasing the risk of inventory accumulation.
For downstream spinners, the current phase is a critical window for weighing 'taking warehouse receipts' versus 'waiting for spot goods.' Expectations of tightening supply for high-quality cotton have already formed, but whether demand for cotton yarn can recover simultaneously remains uncertain. If terminal orders remain weak, spinners' replenishment pace may continue to be driven by rigid demand, without large-scale concentrated purchases.