Cotton prices are in a strong cycle driven by production cut expectations and weather risks. Latest weekly market data shows domestic cotton prices in China rose steadily due to Xinjiang production cut expectations and declining commercial inventories, while international prices fluctuated narrowly amid macro headwinds and easing weather concerns in US.
Price Divergence: Domestic and International Cotton Prices Move in Opposite Directions
Domestic cotton prices showed a clear upward trend. Zhengzhou Cotton Futures main contract settlement average reached 16,099 yuan/ton, up 230 yuan/ton or 1.4% from the previous week. The China National Cotton Price B Index, representing standard-grade lint cotton prices in inland markets, averaged 17,643 yuan/ton, up 166 yuan/ton or 0.9%. This means raw material procurement costs for domestic textile enterprises are being gradually pushed up.
International cotton prices were relatively weak. New York cotton futures main contract settlement averaged 77.05 US cents/lb, down 0.50 cents/lb or 0.6%. The International Cotton Index (M), representing CIF prices at Chinese main ports, averaged 85.26 cents/lb, down 1.11 cents/lb, equivalent to an import cost of 14,115 yuan/ton, down 222 yuan/ton. The widening domestic-international price gap is making imported cotton more attractive to Chinese textile mills.
Cotton yarn prices also showed divergence. Domestic C32S combed yarn averaged 23,264 yuan/ton, down 10 yuan/ton; while imported C32S combed yarn averaged 22,861 yuan/ton, down 178 yuan/ton, widening the price gap to 403 yuan/ton. This means imported cotton yarn has a clearer price advantage, which may further suppress domestic yarn's pricing power.
Production Risks: Weather and Acreage Dual Tightening
Weather conditions in major cotton-producing regions are becoming the market's core focus. Xinjiang cotton areas have generally entered the early flowering stage. Although earlier light and temperature conditions were favorable, the Central Meteorological Observatory forecasts sustained high temperatures of 37-43°C from July 1-7 in northwest and south-central north China. As cotton enters the boll-setting stage, the duration of heat stress and water-fertilizer management will become key determinants of yield.
India's production cut signals are more clear. The Indian Meteorological Department expects July monsoon rainfall to be below normal, and Reuters reports India's cotton acreage has dropped 35% year-on-year. If monsoon rains remain weak, India's cotton output could be further reduced, exacerbating global supply tightness.
In the US, the USDA's June 30 planted acreage report showed 2026 US cotton acreage at 9.85 million acres, up 6% year-on-year. However, drought relief in US cotton areas is limited, leaving yield uncertainty. Brazil's new cotton harvest is progressing faster than last year, with 146,800 tons exported in the first 14 working days of June, up 10.6% from June 2025, providing an important supply supplement.
Demand Side: Policy and Geopolitical Risks Suppress Consumption Expectations
Negative factors on the demand side are accumulating. The EU announced from July 1 a fixed tariff on cross-border small parcels under 150 euros, and the Ecodesign for Sustainable Products Regulation takes effect July 19, banning destruction of unsold clothing. These policies are expected to create headwinds for textile and apparel consumption, especially for small and medium textile enterprises relying on cross-border e-commerce.
Textile and apparel export data from major Southeast Asian countries already show a downward trend. In May, Bangladesh's exports were $440 million, down 90% month-on-month and year-on-year; Cambodia's exports were $180 million, down 88% month-on-month and 87% year-on-year; in April, Vietnam's exports were $3.72 billion, down 9% month-on-month and 4% year-on-year. These figures indicate global textile and apparel demand is contracting.
Renewed US-Iran military conflict has heightened concerns about shipping safety through the Strait of Hormuz, raising expectations of an international oil price rebound. Higher oil prices will directly push up chemical fiber raw material prices. This week, domestic polyester staple fiber average price fell 178 yuan/ton to 7,187 yuan/ton, but if oil prices continue to rise, chemical fiber prices may reverse their decline, indirectly supporting cotton prices.