Cotton prices staged a sharp rally and retreat in May 2026. The CCIndex 3128B hit a 2.5-year high of 18,211 yuan/ton on May 7, but quickly fell back as off-season demand weakened and international markets softened. The monthly average settled at 17,789 yuan/ton, up 23.1% year-on-year but only 3.6% month-on-month. This price surge did not translate into wider margins for spinners—instead, profit pressure intensified.
Background
May marked the traditional off-season for textiles. New orders were insufficient, and mills purchased cotton only in small batches on dips. According to the National Bureau of Statistics, national yarn output in May was 1.869 million tons, up just 2.7% year-on-year and down 1% month-on-month. Xinjiang produced 319,000 tons, up 18.6% year-on-year but down 3.6% from April. The average price of 32s pure cotton yarn was 23,277 yuan/ton, up 795 yuan/ton month-on-month—a 3.5% increase, far below cotton's 23.1% annual gain. This divergence squeezed mill profitability.
Industry Impact
Exports showed structural improvement. Customs data shows textile and apparel exports reached $25.6 billion in May, up 6.5% month-on-month but still down 2.3% year-on-year. Exports to the US and EU surged 24.7% and 25.6% month-on-month, respectively, and to Belt and Road countries rose 9.7%. This recovery was partly driven by progress in Sino-US trade talks and China's zero-tariff policy for Africa. However, cotton garment exports of $2.04 billion fell 3.7% year-on-year, indicating that cotton products lagged behind the overall export recovery.
Cotton imports dropped sharply month-on-month to 113,000 tons, down 31.7%, though still up 2.3 times year-on-year. Brazilian cotton accounted for 57.7% of imports, while US cotton's share rose to 22.1%. Cumulative imports from January to May reached 825,000 tons, up 91% year-on-year. This import mix shift reflects mills' growing reliance on Brazilian cotton, with US purchases driven by policy windows and price spreads.
Inventory data showed a divergence: commercial cotton stocks stood at 3.745 million tons at end-May, up 8.3% year-on-year, while industrial stocks fell 10.1% to 846,000 tons. High commercial stocks signal ample supply, but low mill inventories indicate caution toward elevated prices.
Seedling conditions were subpar. By end-May, 85.5% of cotton was at the 4-8 true-leaf stage, down 8.9 percentage points year-on-year. Persistent rain in inland regions caused waterlogging, and planting progress in the Yangtze River basin lagged by 6.9 percentage points. Only 45.9% of surveyed farmers rated seedling conditions as good or better than last year, down 34 percentage points, suggesting potential lower yields for the new crop—a factor that could support forward prices.