May's cotton market staged a dramatic high-to-low reversal. Domestic prices hit an 18,211 yuan/ton peak on May 7—a two-and-a-half-year high—before retreating sharply. The monthly average still rose 23.1% year-on-year, but this masked underlying demand weakness as the textile off-season set in.
Supply and Demand Both Contract
National Bureau of Statistics data shows May yarn output at 1.869 million tons, up just 2.7% year-on-year and down 1% month-on-month. Xinjiang output of 319,000 tons grew 18.6% year-on-year but fell 3.6% sequentially. The 32-count pure cotton yarn average price of 23,277 yuan/ton rose 795 yuan month-on-month, but this lagged far behind cotton price gains, squeezing mill margins.
Import data confirms weak demand. May cotton imports of 113,000 tons plunged 31.7% month-on-month, though still up 2.3 times year-on-year. Brazilian cotton dominated at 57.7%, while US share rose to 22.1%. Cumulative January-May imports of 825,000 tons were up 91% year-on-year, but the sharp monthly decline signals mills' reluctance to build inventories.
Inventory data reinforces cautious sentiment. Commercial stocks at end-May stood at 3.745 million tons, down 13.3% month-on-month but still 8.3% higher year-on-year. Industrial stocks of 846,000 tons fell 3.5% month-on-month and 10.1% year-on-year. Mills are buying only for immediate needs, unwilling to hold expensive inventory.
Export Recovery Can't Offset Domestic Weakness
Customs data shows May textile and apparel exports of $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. January-May cumulative exports of $116.73 billion edged up 0.1%. Cotton garment exports of $2.04 billion rose 11.9% month-on-month but fell 3.7% year-on-year.
Export improvement came from two drivers: progress in US-China trade talks boosted US-bound exports 24.7% month-on-month, and China's zero-tariff policy for African countries unlocked new demand. EU exports also rose 25.6% month-on-month. But this is largely seasonal repair and policy-driven, with sustainability uncertain.
The USDA May report raised global 2025/26 production to 26.702 million tons and consumption to 26.156 million tons, with ending stocks at 16.823 million tons—all at recent highs. International cotton prices weakened on a strong dollar and poor US export performance. The Cotlook A index averaged 92 US cents/lb, equivalent to 15,518 yuan/ton after 1% tariff, 2,270 yuan below domestic prices, narrowing the spread by 257 yuan.
New Crop Sowing Complete, Seedling Conditions Weaker
China Cotton Association surveys show national sowing progress at 99.5% by end-May, with Xinjiang fully completed. But inland cotton regions suffered persistent rain. The Yellow River basin reached 95.6%, 1.4 percentage points behind last year; the Yangtze River basin reached 99.3%, 6.9 points behind.
Only 45.9% of surveyed farmers rated seedling conditions better than or equal to last year, down 34 percentage points. 76.8% reported mild disease, down 3.2 points. 85.5% of cotton was at the 4-8 true-leaf stage, down 8.9 points. Local waterlogging slowed growth, and overall development lags last year.
Policy and Conference Signals
The 2026 China Cotton Industry Development Summit Forum was held in Chongqing on May 28-29, themed 'Change and Reconstruction: Shaping a New Global Cotton Landscape.' Nearly 400 attendees discussed macro policy, supply chain collaboration, and market risks. The launch of cotton product origin evaluation could open new paths for export certification and brand premium.
The new Xinjiang cotton target price policy briefly boosted sentiment but didn't alter fundamentals. It provides a floor against sharp declines, not a driver for rallies.