The price gap between domestic cotton and imported cotton has widened to over 3,500 yuan per ton, a signal the industry cannot ignore. The China National Cotton Price B Index averaged 17,643 yuan per ton this week, while the landed cost of imported cotton (at 1% tariff) was only 14,115 yuan per ton. This scissors gap means textile mills face greater raw material cost pressure when choosing domestic fiber.
Supply Side: Yield Reduction Expectations and Weather Risks Converge
Xinjiang cotton regions are enduring a severe heatwave. The Central Meteorological Observatory forecasts sustained high temperatures of 37-43°C in northwest and south-central North China through early July, coinciding with the critical blooming and boll-setting period. Although current cotton field structures are generally sound and no large-scale disasters have occurred, the duration of heat stress, water and fertilizer availability, and extreme weather evolution will be key variables determining final yields. Industry insiders widely believe that if high temperatures persist beyond a week, there will be substantial negative impacts on boll setting rates and boll weight.
Meanwhile, expectations of a Xinjiang cotton production decline continue to build. This is not unfounded—last year's output already fell, and this spring's low temperatures delayed planting. Coupled with the current heat stress, the probability of a production drop is rising. Commercial inventories are also depleting rapidly, further narrowing supply safety margins.
Global Supply Patterns Diverge Clearly
Major cotton-producing countries show starkly different trends. The USDA's June 30 planted acreage report shows 2026 US cotton acreage at 9.85 million acres, up 6% year-on-year, with squaring and boll-setting progress generally ahead of last year. This contrasts sharply with India—the Indian Meteorological Department expects July monsoon rainfall to be below normal, and Reuters reports India's cotton planted area has fallen 35% year-on-year. In Brazil, new crop harvesting is progressing smoothly, with exports reaching 146,800 tons in the first 14 working days of June, 10.6% higher than June 2025, indicating accelerated shipments.
This supply divergence suggests global cotton supply-demand is moving toward a tight balance. The Indian production decline and US acreage increase offset each other, but Brazil's faster exports cannot fully compensate for the Indian shortfall, especially given India's role as a major cotton exporter.
Demand Side: Southeast Asian Export Slump and EU Policy Tightening
Export data from major Southeast Asian textile and apparel exporters is concerning. In May, Bangladesh's exports were only $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 reflect a significant downward cycle in global textile and apparel demand.
On the EU front, since July 1, fixed tariffs have been imposed on cross-border small parcels valued under €150, and the Ecodesign for Sustainable Products Regulation takes effect July 19, banning the destruction of unsold clothing. Both policies will raise market entry barriers, particularly impacting small and medium textile enterprises reliant on cross-border e-commerce channels. As the world's largest textile and apparel import market, the EU's policy shift will inevitably have far-reaching impacts on global supply chain dynamics.
Transmission and Response Along the Chain
The contrast between strong upstream cotton prices and weak downstream demand means textile enterprises face dual pressures on costs and orders. Domestic C32S carded yarn averaged 23,264 yuan per ton this week, down only 10 yuan from the previous week, but imported yarn prices have fallen to 22,861 yuan per ton, 403 yuan lower than domestic yarn. The price advantage of imported yarn is widening, threatening domestic yarn market share.
Polyester staple fiber prices continue to fall, averaging 7,187 yuan per ton, down 2.4%. The widening gap between chemical fiber and cotton prices may prompt some mills to adjust raw material ratios, increasing chemical fiber usage to reduce costs.