In May, domestic cotton prices experienced a roller-coaster ride: driven by supply-side tightening expectations and concentrated inventory replenishment, the CCIndex 3128B hit a 2.5-year high of 18,211 yuan/ton on May 7. However, as off-season demand weakened and external markets dragged down, prices quickly retreated. Although the Xinjiang cotton target price policy provided a brief boost at month-end, the monthly average settled at 17,789 yuan/ton, up 23.1% year-on-year and 3.6% month-on-month. This data reflects the textile industry's shift from 'panic buying' to 'wait-and-see'—procurement strategies have pivoted from active stockpiling to minimal, just-in-time purchases at lower prices.
Dual Pressure on Supply and Demand
According to the National Bureau of Statistics, national yarn output in May was 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month. Xinjiang produced 319,000 tons, with year-on-year growth of 18.6% but a sequential decline of 3.6%, signaling a clear slowdown. The average price of 32-count pure cotton yarn was 23,277 yuan/ton, up 795 yuan/ton month-on-month, but the 3.5% increase lagged far behind cotton price gains, squeezing corporate profit margins. The core issue is insufficient new orders—the textile industry entered its traditional off-season, slowing production and sales, with finished goods inventories piling up, mill operating rates falling, and acceptance of high cotton prices declining sharply.
Inventory data confirms this: as of end-May, national commercial cotton inventories stood at 3.745 million tons, down 13.3% month-on-month but still 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 above last year indicate ample upstream supply, while declining industrial inventories reflect weak downstream buying—a classic 'supply-rich, demand-weak' pattern.
Import Plunge Reveals Structural Shifts
Customs data shows May cotton imports were only 113,000 tons, plunging 31.7% month-on-month but still surging 2.3 times year-on-year. Cumulative imports from January to May reached 825,000 tons, up 91% year-on-year. The sharp monthly decline is directly due to weak off-season buying, but the deeper story lies in the changing source structure: Brazilian cotton accounted for 57.7%, while US cotton rose to 22.1%. Brazilian cotton is steadily eating into US market share, reflecting corporate adjustments to avoid tariff risks following the US-China trade talks' positive progress.
The USDA's 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 suggests global cotton supply is ample, and the high domestic prices are more driven by policy expectations and periodic restocking than fundamental support.
Export Recovery but Profit Squeeze
Despite weak domestic demand, exports showed positive signs. Customs data shows May textile and apparel exports at $25.6 billion, up 6.5% month-on-month but down 2.3% year-on-year. January-May cumulative exports were $116.73 billion, up 0.1% year-on-year. Cotton-made garment exports were $2.04 billion, up 11.9% month-on-month. Exports to the US and EU grew 24.7% and 25.6% month-on-month, respectively, while those to Belt and Road countries rose 9.7%.
The recovery is supported by two factors: first, positive outcomes from US-China trade talks triggered order repatriation; second, the zero-tariff policy for African countries officially took effect, releasing demand from emerging markets. However, year-on-year export value is still negative, and cotton-made garment exports fell 3.7% year-on-year, indicating limited recovery strength. Crucially, cotton yarn price gains lagged cotton, so profit pressure persists despite export improvement.
Xinjiang Policy and Seedling Concerns
In late May, the new round of Xinjiang cotton target price policy was announced, providing a short-term market boost. But its sustainability depends on implementation details and acreage changes. The China Cotton Association survey shows national cotton planting progress at 99.5% as of end-May, slightly slower than last year. Xinjiang has completed planting, but inland cotton regions faced persistent rain, with the Yangtze River basin progress lagging 6.9 percentage points year-on-year.
For seedling conditions, only 45.9% of surveyed households rated current seedlings as better or equal to last year, a 34-percentage-point decline. 76.8% reported mild disease damage, down 3.2 percentage points. Excessive local rainfall caused waterlogging, stunting seedling growth, with overall seedling quality worse than last year. If adverse weather continues, it could affect new-crop yields, providing support for forward prices.
Industry Consensus: Reshaping in Change
On May 28-29, the 2026 China Cotton Industry Development Summit Forum was held in Chongqing, with nearly 400 domestic and international delegates. The theme 'Change and Restructuring: Shaping a New Global Cotton Landscape' highlighted the industry's shift from price competition to value competition. The launch of a cotton product origin evaluation program suggests the industry is moving toward differentiation. With both supply and demand under pressure, companies need more refined inventory management and supply chain optimization to navigate volatility.