May Cotton Market Enters Off-Season: Price Battles Amid Weak Demand and Policy Support

China's domestic cotton market experienced a rally-and-retreat cycle in May, with the initial driver shifting from tight supply expectations to weakening demand by month-end. The CCIndex 3128B hit a 2.5-year high of 18,211 yuan/ton on May 7 before retreating, yet the monthly average still rose 23.1% year-on-year to 17,789 yuan/ton. This high price level failed to sustain downstream orders as the textile sector entered its traditional off-season, with insufficient new orders and slower production. Mills adopted cautious procurement strategies, mainly replenishing on price dips, leading to commercial inventories higher than last year.

Demand Side: Slower Yarn Output Growth, Squeezed Margins National Bureau of Statistics data show May yarn output at 1.869 million tons, up only 2.7% year-on-year and down 1% month-on-month. Xinjiang output reached 319,000 tons, up 18.6% year-on-year but down 3.6% month-on-month. Although yarn prices followed cotton higher, the increase was weaker—32-count pure cotton yarn averaged 23,277 yuan/ton, up 795 yuan/ton month-on-month and 2,811 yuan/ton year-on-year. Rising raw material costs without proportional yarn price gains squeezed mill profitability, reducing their acceptance of high cotton prices and leading to rising finished goods inventories and declining industrial stocks.

Exports showed structural recovery. Customs data indicate May textile and apparel exports reached $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, becoming the main growth drivers. Progress in US-China trade talks and China's zero-tariff policy for African countries supported order repatriation and emerging market demand. However, cotton apparel exports fell 3.7% year-on-year to $2.04 billion, indicating ongoing pressure on cotton-made products.

Supply Side: Imports Drop Sharply, Inventories Higher Year-on-Year Due to weak off-season demand, mill purchasing of foreign cotton weakened. May cotton imports were only 113,000 tons, down 31.7% month-on-month but still up 2.3 times year-on-year. Brazilian cotton accounted for 57.7%, while US cotton share rose to 22.1%. Cumulative imports from January to May reached 825,000 tons, up 91% year-on-year, reflecting earlier large import volumes. As of end-May, national commercial cotton inventory stood at 3.745 million tons, down 13.3% month-on-month but up 8.3% year-on-year; industrial inventory was 846,000 tons, down 3.5% month-on-month and 10.1% year-on-year. The inventory structure suggests downstream destocking is stronger than restocking.

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. The global supply-demand surplus continues to pressure prices.

International Prices and Spread International cotton prices rose then fell—supported by commodity markets early in the month but dragged down by a strong US dollar and weak US export performance later. The Cotlook A index averaged 92 US cents/lb, up 18% year-on-year and 6.5% month-on-month. After applying the 1% tariff, the price was 15,518 yuan/ton, 2,270 yuan/ton below domestic prices, narrowing the spread by 257 yuan from the previous month. The narrowing spread reduces the cost advantage of imported cotton, but domestic prices remain above international levels, challenging mill cost control.

New Cotton Planting and Seedling Conditions By end-May, national cotton planting progress reached 99.5%, 0.2 percentage points slower than last year. Xinjiang was fully planted, but the Yellow River and Yangtze River regions lagged at 95.6% and 99.3% respectively. Persistent rainfall in inland cotton areas caused waterlogging, stunting seedling growth. Nationwide, 85.5% of cotton was in the 4-8 true leaf stage, down 8.9 percentage points year-on-year. Only 45.9% of surveyed farmers rated seedling conditions better or equal to last year, a 34 percentage point drop. Poor seedling conditions could affect new-season yield expectations, providing some support for forward prices.

Industry Event: Cotton Development Summit in Chongqing The 2026 China Cotton Development Summit was held in Chongqing on May 28-29, with the theme "Change and Reconstruction: Shaping a New Global Cotton Pattern." Nearly 400 domestic and international participants discussed macro policies, industrial chain collaboration, and market risk management. The meeting launched the origin evaluation of cotton products, a move that could enhance brand trust for Chinese cotton goods and serve as a differentiation tool in international trade.

Practical Recommendations

For Buyers - Current cotton prices are in a high-range oscillation. Recommend procurement based on actual needs and replenishing on price dips, avoiding chasing highs. Monitor the domestic-international spread; if it narrows further, consider increasing imported cotton allocation to lower costs. - Closely watch new cotton seedling conditions and weather. If conditions continue to deteriorate, forward supply may tighten. Consider establishing long futures positions to lock in costs.

For Exporters - US and EU markets showed significant month-on-month growth. Focus on expanding order capacity in these regions while leveraging the zero-tariff policy for Africa to explore emerging markets. - Cotton apparel exports are still declining year-on-year. Recommend optimizing product mix by increasing differentiated, high-value-added cotton goods to cope with profit pressure from global cotton price volatility.