In May, domestic cotton prices peaked at a two-and-a-half-year high and then quickly retreated, as the traditional off-season for the textile industry shifted market sentiment from excitement to caution. Data from the China Cotton Association shows several key indicators of the cotton textile chain weakened simultaneously, while the global supply glut further capped price rebounds.
Domestic Demand Weakens, Export Structure Improves
National Bureau of Statistics data shows that national yarn output in May was 1.869 million tons, up 2.7% year-on-year but down 1% month-on-month. Output in Xinjiang was 319,000 tons, down 3.6% month-on-month, indicating that order contraction at the end of the peak season has transmitted to upstream. The average price of 32s pure cotton yarn was 23,277 yuan/ton, up 795 yuan month-on-month, but the increase was far lower than the 3.6% month-on-month rise in cotton spot prices, squeezing mill profits.
Exports showed structural improvement. Customs data shows May textile and apparel exports were $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. Exports to the US and the EU grew 24.7% and 25.6% month-on-month respectively, driven by progress in Sino-US trade talks and the implementation of zero-tariff policy for African countries, with emerging markets filling the gap left by traditional markets.
Import Plunge and Global Inventory Glut
Cotton imports fell sharply in May, totaling only 113,000 tons, down 31.7% month-on-month. Although still up 2.3 times year-on-year, the month-on-month drop reflects mills' resistance to high-priced foreign cotton. Brazilian cotton accounted for 57.7%, while US cotton share rose to 22.1%. The USDA May report raised 2025/26 global cotton production to 26.702 million tons, consumption to 26.156 million tons, and ending stocks to 16.823 million tons, all at multi-year highs. This means ample global supply limits international price upside. The Cotlook A index averaged 92 US cents/lb, equivalent to 15,518 yuan/ton after 1% tariff, 2,270 yuan lower than domestic prices, narrowing the price gap by 257 yuan month-on-month.
Slow Inventory Drawdown, Seedling Risks Emerge
By end-May, national commercial cotton inventory stood at 3.745 million tons, down 13.3% month-on-month but still up 8.3% year-on-year. Industrial inventory was 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. Mills replenished cautiously on a need-only basis, reflecting uncertainty about future cotton prices.
On the planting side, national cotton sowing progress was 99.5%, roughly flat year-on-year, but inland cotton areas experienced persistent rain, with the Yangtze River basin lagging by 6.9 percentage points. By end-May, 85.5% of cotton was at the 4-8 true leaf stage, down 8.9 percentage points year-on-year. Only 45.9% of surveyed farmers rated seedling conditions as better than last year, a 34-percentage-point drop. If weather does not improve, new crop yields could be affected, adding uncertainty to year-end supply expectations.
Policy Support and Industry Consensus
The new round of Xinjiang cotton target price policy landed in late May, briefly boosting sentiment but failing to reverse the price decline. The 2026 China Cotton Industry Development Summit Forum was held in Chongqing from May 28-29, attended by nearly 400 domestic and international representatives. The meeting launched a cotton product origin evaluation initiative, aiming to enhance brand recognition of domestic cotton and cotton products, a strategic move amid the Sino-US trade friction.