In May 2026, China's domestic cotton prices hit a two-and-a-half-year high before quickly retreating. The monthly average price stood at 17,789 yuan/ton, up 23.1% year-on-year but only 3.6% month-on-month. This data reflects a deep-seated contradiction: the textile industry has entered its traditional off-season, orders are insufficient, and cost transmission is blocked.
Supply and Demand Both Weaken
According to the National Bureau of Statistics, national yarn output in May was 1.869 million tons, up 2.7% year-on-year but down 1% month-on-month. Xinjiang produced 319,000 tons, up 18.6% year-on-year but down 3.6% month-on-month. As output growth slowed, corporate profit margins narrowed significantly: the average price of 32-count combed cotton yarn was 23,277 yuan/ton, up 795 yuan month-on-month (3.5%), far below the increase in cotton prices. This shows that downstream has limited capacity to absorb high-priced cotton, and cost pressure is being transmitted upstream.
Import data also confirms weak demand. Customs statistics show May cotton imports were only 113,000 tons, down 31.7% month-on-month, though up 2.3 times year-on-year. Brazilian cotton accounted for 57.7%, while US cotton rose to 22.1%. The sharp drop in imports directly reflects a shift in textile enterprises' procurement strategy from active stockpiling to opportunistic replenishment.
High Inventories and Cost Negotiation
By end of May, national commercial cotton inventories stood at 3.745 million tons, down 13.3% month-on-month but up 8.3% year-on-year. Industrial inventories were 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. Commercial inventories higher than last year suggest supply is not tight; industrial inventory declines indicate companies are actively destocking and adopting a wait-and-see attitude.
The narrowing of the domestic-international price spread reinforces this assessment. In May, the Cotlook A index averaged 92 US cents/lb, equivalent to 15,518 yuan/ton after 1% tariff, which is 2,270 yuan lower than domestic prices. The spread narrowed by 257 yuan from the previous month. The reduced cost advantage of imported cotton dampened import demand and left domestic prices without external support.
New Cotton Planting and Climate Variables
China Cotton Association data shows the national planting progress reached 99.5% by end of May, slightly slower than last year. Xinjiang has completed all planting, but the Yellow River region was 95.6% (1.4 percentage points slower), and the Yangtze River region 99.3% (6.9 percentage points slower). Persistent rainfall in inland cotton areas caused waterlogging, delaying seedling growth: only 45.9% of surveyed farmers considered seedling conditions better or equal to last year, a sharp drop of 34 percentage points. This implies uncertainty in both yield and quality of the new crop.
Structural Divergence in Export Recovery
Export data shows a recovery trend but with clear structural divergence. 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 EU grew 24.7% and 25.6% month-on-month respectively, while exports to Belt and Road countries grew 9.7%. The phased progress in US-China trade talks and the zero-tariff policy for African countries have indeed released some order backflow and new market demand. However, cotton garment exports were only $2.04 billion, down 3.7% year-on-year and up just 11.9% month-on-month, indicating that high-value-added categories are recovering more slowly.
Industry Consensus and Policy Anchor
The 2026 China Cotton Industry Development Summit Forum, held in Chongqing at end of May, gathered nearly 400 domestic and international representatives under the theme "Change and Reconstruction: Shaping a New Global Cotton Landscape." The forum launched a cotton product origin evaluation initiative aimed at enhancing supply chain transparency and trust, providing technical support for future trade negotiations. Meanwhile, the new round of Xinjiang cotton target price policy was implemented. Although it briefly boosted market confidence in late May, the small rebound in cotton prices suggests that policy effects are being offset by weak demand.