International cotton prices fluctuated narrowly under the combined effect of macro headwinds and improved weather in US cotton areas, while domestic cotton prices staged an independent upward trend. In the past week, the average settlement price of the main contract of Zhengzhou cotton futures reached 16,099 yuan per ton, up 230 yuan per ton from the previous week, an increase of 1.4%. Behind this, the expectation of production cuts in Xinjiang cotton areas and the continuous destocking of commercial inventories formed the strongest support.
Supply Side: Double Squeeze from Weather and Policy
The firmness of domestic cotton prices is driven by tightening expectations on the supply side. As the largest cotton producing area in China, the weather conditions in Xinjiang directly affect market nerves. Currently, cotton in Xinjiang has generally entered the early flowering stage. Although some cotton areas in southern Xinjiang have experienced periodic high temperatures, thanks to irrigation guarantees, no large-scale disasters have occurred. However, the Central Meteorological Observatory predicts that from early July, the northwest and southern parts of North China will experience sustained high temperatures of 37-43 degrees Celsius, posing a severe test for the cotton boll-setting period. The duration of high-temperature heat damage and the guarantee capacity of water and fertilizer will become core variables determining yield levels.
Meanwhile, the supply pattern in other major producing countries is also changing. The latest actual planting area report from the USDA shows that the actual planted area of US cotton in 2026 is 9.85 million acres, up 6% year-on-year. However, in India, due to the meteorological department's prediction that July monsoon rainfall will be below normal, Reuters reported that its cotton planting area decreased by 35% year-on-year. Brazilian new cotton harvesting is progressing, with export pace faster than last year. In the first 14 working days of June, exports reached 146,800 tons, up 10.6% from June 2025. This pattern of "US cotton expanding, Indian cotton shrinking, and Brazilian cotton increasing" means that the global cotton supply-demand balance sheet is undergoing structural adjustment.
Demand Side: Overlay of Downstream Weakness and New Policies
In contrast to the tight supply side, the downstream demand side shows obvious weakness. The price of domestic C32S carded yarn fluctuated slightly, with the weekly average price down 10 yuan per ton to 23,264 yuan per ton, while the price of imported cotton yarn fell more sharply, with the weekly average price down 178 yuan per ton to 22,861 yuan per ton. The price difference between imported yarn and domestic yarn is 403 yuan per ton. This price structure indicates that the recovery of end-order is not strong enough to support yarn prices, and textile enterprises' willingness to purchase raw materials remains cautious.
More far-reaching impacts come from overseas policy changes. The EU announced that from July 1, it will impose fixed tariffs on cross-border small parcels worth less than 150 euros, and the Ecodesign for Sustainable Products Regulation will take effect on July 19, banning the destruction of unsold clothing. The implementation of these policies will directly increase the operating costs of cross-border e-commerce and suppress textile and garment exports from Southeast Asian countries. Data shows that in May, Bangladesh's exports fell by 90% month-on-month and year-on-year, Cambodia's exports fell by 88% month-on-month and 87% year-on-year, and in April, Vietnam's exports fell by 9% month-on-month and 4% year-on-year. The downward trend of textile and garment exports in Southeast Asia means that the global textile trade pie is shrinking, and Chinese textile enterprises will face more intense competition for existing markets.
Macro Environment: Oil Price Expectations and Exchange Rate Fluctuations
The recent re-eruption of military conflict between the US and Iran has increased market concerns about the safety of shipping in the Strait of Hormuz, and international oil prices are expected to rebound. Rising oil prices will directly push up the cost of chemical fiber raw materials. Domestic polyester staple fiber prices have continued to decline, with the weekly average price down 178 yuan per ton to 7,187 yuan per ton, but if oil prices continue to rise, polyester staple fiber prices may stop falling and rebound, indirectly supporting cotton prices. In addition, fluctuations in the RMB exchange rate are also noteworthy. The cost of imported cotton converted into RMB is 14,115 yuan per ton, down 222 yuan per ton from the previous week, a decrease of 1.5%, which to some extent alleviates the cost pressure of domestic cotton-consuming enterprises.
From a macro perspective, the domestic manufacturing PMI is 50.3%, up 0.3 percentage points month-on-month, returning to the expansion range, and industrial enterprise profits increased by 18.8% year-on-year. The number of overseas exhibition and project participation by enterprises in traditional advantageous industries such as textiles and clothing and machinery ranks among the top three, showing strong resilience. However, there is still a gap between macro data and micro feelings, with most textile enterprises reporting that orders are increasingly characterized by "short, small, and urgent."
Market Outlook: Strong Fluctuation Remains the Main Theme
Overall, the tightening of global cotton supply and demand, coupled with increased weather risks in major producing areas, is the dominant factor driving cotton prices higher. However, the market has significant differences on the direction of subsequent policies. The results of the US 301 tariff hearing and changes in import volume after India cancels cotton import tariffs will become key variables affecting short-term price fluctuations. It is expected that cotton prices will maintain strong fluctuations in the short term, but the upside space is limited by weak downstream demand.