In early July, a notable divergence emerged in the long-staple cotton market: while demand for 60s and above high-count yarns weakened and mill quotes continued to decline, spot prices for Xinjiang long-staple cotton remained remarkably firm, with some mills even narrowing discounts for regular customers. This price signal disconnect reflects deeper strategic positioning along the textile supply chain during the off-season.
Upstream Holding vs. Downstream Caution
Cotton enterprises are showing stronger holding sentiment. A major trader in Aksu region currently holds only 11 batches of machine-picked long-staple cotton from the 2025/26 season, with fiber strength between 39-41 CN/TEX. The company explicitly stated it is in no rush to sell and prefers large-scale spinners to purchase in bulk, showing little interest in small-lot transactions. This attitude is representative: as of July 8-9, 2024/25 grade 236/335/336 long-staple cotton in Bayingolin prefecture was quoted at 26,720-26,920 yuan/ton (including one-month truck delivery), while 2025/26 grade 336 cotton (strength 40-42 CN/TEX) in Aksu was quoted at 28,220 yuan/ton. Compared with late June, these quotes have barely changed.
Meanwhile, downstream spinners are taking the opposite approach. Several large mills in Shandong, Jiangsu, and Henan reported limited inventories of 2024/25 and 2025/26 long-staple cotton in inland warehouses, concentrated in Zibo, Weifang, and Jiangyin. Given weak high-count yarn orders, spinners are maintaining just-in-time purchasing and shifting to a "light inventory" model. To adapt, traders now allow buyers to take half-batch deliveries — contracts are signed for full batches, but payments are made based on actual withdrawal quantities. This flexibility essentially trades sales convenience for liquidity.
Why U.S. Pima Expansion Failed to Impact Domestic Prices
Notably, the USDA projects 2026/27 U.S. Pima cotton planted area at 150,000 acres, up 6% year-on-year. This figure was significantly underestimated in March, when the USDA's prospective plantings report predicted only 130,000 acres, down 8.1% year-on-year. The actual area is 15.4% higher than the March estimate, suggesting a potential supply surplus in U.S. long-staple cotton.
However, this bearish factor has not transmitted to domestic spot prices. Two reasons explain this: First, a 6% annual increase is modest in absolute terms — 150,000 acres of Pima yield roughly 60,000-70,000 tons, a small volume relative to global long-staple consumption. Second, domestic spinners are currently focused on near-term inventory costs and order visibility, not forward supply. With high-count yarn margins compressed, even lower import prices would not trigger aggressive buying.
What the "Lukewarm" Trading Means
The current long-staple cotton market can be characterized as "prices with a floor, but no volume." Mills won't cut prices, spinners won't build inventories, and both sides are locked in a standoff within the 26,700-28,200 yuan/ton range. This state has distinct implications:
- For upstream ginners and traders, firm quotes protect inventory value but extend capital lock-up. If the off-season persists through August-September, smaller mills facing loan repayments may be forced to lower prices.
- For spinners, light inventories reduce downside risk, but if orders pick up in September-October, they may face spot shortages or be forced to accept higher prices.
- For foreign trade firms, stable long-staple prices aid in pricing high-count yarn exports, but end-customers have limited capacity to absorb cost increases, forcing margin compression inland.