Domestic cotton prices surged sharply on a weekly average basis, driven by expectations of output cuts in Xinjiang and continued destocking of commercial inventories. The main contract of Zhengzhou Cotton Futures rose by 230 yuan per ton week-on-week to 16,099 yuan per ton, up 1.4%, while the National Cotton Price B Index climbed to 17,643 yuan per ton. In contrast, international cotton prices moved in the opposite direction, with the main contract of New York Cotton Futures falling 0.6% week-on-week and the China port landed average for imported cotton dropping 1.3%. The widening domestic-international price spread means that the cost advantage of imported cotton is narrowing, forcing textile mills into a difficult procurement decision: lock in relatively cheaper imports or bet on continued domestic price increases?
Divergent Weather Risks and Planting Area Changes
The divergence in global major cotton-producing regions is intensifying market anxiety. Xinjiang cotton has entered the early flowering stage. Although some areas have experienced periodic high temperatures, no large-scale disasters have occurred thanks to irrigation and refined management. However, the Central Meteorological Observatory forecasts that from July 1 to 7, temperatures in Northwest and South North China will reach 37 to 43 degrees Celsius. As cotton enters the peak flowering and boll-setting period, the duration of high temperatures and water-fertilizer availability will be key determinants of final yields.
Meanwhile, the India Meteorological Department indicated that July monsoon rainfall is expected to be below normal, and Reuters reported that India's cotton planting area has dropped by 35% year-on-year. This decline far exceeds market expectations, potentially leading to a sharp reduction in Indian cotton production and further tightening global supply. The USDA's acreage report showed that 2026 US cotton planted area increased by 6% year-on-year to 9.85 million acres, but drought relief in producing areas remains limited, leaving yields uncertain. Brazil's new cotton harvest is progressing smoothly, with exports in the first 14 working days of June 10.6% higher than the same period last year, providing a key supplement to global supply.
What does the interplay of weather risks and area changes mean for buyers? The expectation of a Xinjiang output cut has already pushed up domestic cotton prices. If Indian cotton production is confirmed to decline, international prices may follow suit, narrowing the domestic-international spread and eroding the cost advantage of imported cotton. Textile mills need to evaluate alternative raw material strategies in advance, especially for medium and low-count yarns that heavily rely on Indian cotton. Once supply tightens, cost pass-through will be more direct.
Macro Policy and Downstream Demand Squeeze
Downstream demand is also under multiple pressures. The EU began imposing fixed tariffs on cross-border small parcels under 150 euros from July 1, and the Ecodesign for Sustainable Products Regulation will take effect on July 19, banning the destruction of unsold clothing. These policies will directly increase the cost of imported textiles and clothing in the EU, curbing consumption growth. Textile and apparel exports from major Southeast Asian countries have already declined: Bangladesh's exports fell 90% month-on-month in May, Cambodia's dropped 88%, and Vietnam's exports fell 9% month-on-month and 4% year-on-year in April. This trend is unlikely to reverse in the short term, signaling a cooling global textile and apparel demand.
Domestic macro data shows some resilience. The June manufacturing PMI rose 0.3 percentage points month-on-month to 50.3%, returning to expansion territory; profits of industrial enterprises above designated size grew 18.8% year-on-year. Data from the China Council for the Promotion of International Trade shows that textile, apparel, and leather products rank among the top three industries for overseas exhibition participation, indicating continued vitality in traditional foreign trade sectors. However, whether macro optimism translates into actual orders remains to be seen.
For textile mills, the current situation involves dual pressure from rising raw material costs and weak end demand. Cotton yarn prices have only fluctuated slightly, with C32S combed yarn down 10 yuan per ton week-on-week, while polyester staple fiber prices continued to fall, dropping 178 yuan per ton. The substitution effect of chemical fibers is strengthening. Some mills may adjust their cotton blending ratios, increasing the use of polyester and other chemical fibers to hedge against rising cotton prices.