Domestic cotton prices strengthened for a second consecutive week, with the Zhengzhou Cotton Futures main contract weekly average rising to 16,099 yuan per ton, up 230 yuan per ton or 1.4% from the previous week. The National Cotton Price B Index also rose to 17,643 yuan per ton, up 0.9%. The core logic behind this rally is clear: Xinjiang production cut expectations combined with continuous commercial inventory depletion signal a tightening supply side.
Supply-Side Dynamics
Cotton growth conditions across major producing countries show significant divergence. The USDA's June 30 planted acreage report indicates 2026 US cotton planted area reached 9.85 million acres, up 6% year-on-year, with squaring and boll-setting progress generally better than last year. Brazil's new crop harvest is proceeding smoothly, with exports in the first 14 working days of June reaching 146,800 tons, 10.6% higher than the same period in 2025. These point to potential supply increases internationally.
However, India sends a contrasting signal. The Indian Meteorological Department expects July monsoon rainfall below normal, and Reuters reports Indian cotton planting area has fallen 35% year-on-year. If realized, this reduction would significantly offset the production gains from the US and Brazil. Domestically, Xinjiang cotton has generally entered the early flowering stage, with growth progress largely in line with normal years. However, the Central Meteorological Observatory forecasts sustained high temperatures of 37-43°C in northwest and south-central North China from July 1-7, posing a direct threat to cotton entering the peak flowering and boll-setting period. The duration of heat stress and water/fertilizer availability will be the core variables determining final yield.
This means the pricing logic for cotton is shifting from 'inventory depletion' to 'weather risk premium'. In the short term, supply-side uncertainty will continue to support firm cotton prices.
Widening Domestic-International Spread
Compared to the narrow fluctuations in international cotton prices, domestic prices have risen more significantly, widening the spread. The NY Cotton Futures main contract weekly average was 77.05 US cents per pound, down 0.6% from the previous week. The international Cotton Index (M) converted to yuan landed cost was 14,115 yuan per ton, down 222 yuan per ton or 1.5%. At current levels, imported cotton is about 3,528 yuan per ton cheaper than domestic cotton, a highly prominent price advantage.
This directly impacts downstream spinners' procurement strategies. For mills with import quotas, the current period is clearly a window to lock in lower-cost raw materials. For factories relying on domestic cotton, they face rising cost pressures. Cotton yarn prices have shown slight fluctuations: domestic C32S carded yarn weekly average fell 10 yuan per ton to 23,264 yuan per ton, while imported C32S carded yarn fell 178 yuan per ton to 22,861 yuan per ton, widening the spread to 403 yuan per ton. This reflects weakening downstream demand capacity to absorb high cotton prices.
Macro and Policy Risks
The international macro environment is creating new headwinds for textile and apparel consumption. Renewed US-Iran military conflict has heightened concerns about shipping safety through the Strait of Hormuz, fueling expectations of an oil price rebound, which would directly increase chemical fiber raw material costs. Domestic polyester staple fiber prices have already fallen, with the weekly average dropping 178 yuan per ton to 7,187 yuan per ton. However, if crude oil prices continue to rise, cost pressures on the chemical fiber side will soon transmit.
Two new EU regulations are about to take effect: from July 1, fixed tariffs on cross-border small parcels under 150 euros, and from July 19, the Ecodesign for Sustainable Products Regulation banning the destruction of unsold clothing. These directly challenge companies exporting to the EU via cross-border e-commerce and fast fashion models. Southeast Asian textile and apparel exports are already showing weakness: Bangladesh exports in May fell 90% month-on-month and year-on-year, Cambodia fell 88% month-on-month and 87% year-on-year, and Vietnam exports in April fell 9% month-on-month and 4% year-on-year. Tightening EU policies combined with weakening consumer demand suggest the downward trend in Southeast Asian textile exports may continue.
Domestically, macro data sends positive signals. June manufacturing PMI was 50.3%, up 0.3 percentage points from the previous month, returning to expansion territory. Industrial enterprise profits above designated size grew 18.8% year-on-year. Data from the China Council for the Promotion of International Trade shows that machinery, textile and leather products, and transportation and logistics, the three traditional advantageous industries, ranked among the top three in terms of the number of overseas exhibition projects, indicating strong foreign trade vitality.