Domestic spot cotton prices edged lower in the first half of July, while international cotton futures broke above the 80-cent mark. As of July 13, the spot price for Grade 3128B standard cotton stood at 17,707 yuan/ton, down 0.12% from early July, maintaining a weak oscillating trend. Meanwhile, the ICE cotton futures main contract settled at 81.54 cents/lb, up 4.8% month-to-date, narrowing the domestic-international price spread. This divergence reflects a tug-of-war between supply-side production fears and downstream demand weakness, leaving the market without a clear direction in the near term.
Supply Side: Xinjiang Heatwave Fuels Production Fears, Reserve Release Uncertain
Xinjiang cotton is currently in its critical flowering and boll-setting stage, but persistent temperatures above 35°C across northern and southern Xinjiang since July have caused pollen inactivation, leading to widespread flower and boll shedding. By July 6, the flowering rate across Xinjiang reached 69.3%, entering peak bloom, but growth progress lagged 7.8 percentage points behind the same period last year, with significant regional divergence. Southern Xinjiang faces higher heat stress risks; if extreme weather continues, boll counts and yields face clear downside risks. Market concerns over new-season cotton production cuts have intensified, providing strong downside support for cotton prices.
Another major variable is the anticipated release of state reserves. The market has been circulating rumors of a plan to release over 3 million tons of national reserve stocks. Although no official document has been issued, the bearish expectation of reserve sales has become a key suppressing factor for Zhengzhou cotton futures. Industry analysis suggests that the market has already partially priced in the reserve release sentiment, limiting further downside for futures, with a low probability of a sharp decline. The tug-of-war between production fears and reserve release rumors keeps cotton prices oscillating within a capped range.
Demand Side: Textile Off-Season Weighs, Just-in-Time Procurement Fails to Support
Terminal textile demand remains tepid, with traditional off-season characteristics failing to drive cotton prices higher. Monitoring data shows that as of July 9, spindle utilization in major production areas stood at 73.1%, down 0.81 percentage points from the previous month; finished yarn inventory at mills reached 30 days, up 1.69% month-on-month, with inventories accumulating and operational pressure increasing. Mills are adopting a just-in-time procurement strategy, with limited willingness for large-scale stockpiling. Weak downstream orders constrain raw material procurement, while high yarn and fabric inventories suppress cotton price rebounds, becoming the core bearish factor in the short term.
From an industrial chain perspective, upstream production fears and downstream demand weakness offset each other, leaving cotton prices without a single-direction driver. For traders and mills, chasing highs or selling lows carries high risk in the current environment; just-in-time purchasing and inventory control remain the mainstream strategy.
International Market: USDA Report Neutral-to-Tight, Weather Premium Persists
In contrast to the weak domestic market, ICE cotton futures have steadily moved higher, firmly above the 80-cent/lb key level. The USDA's July global cotton supply-demand report was neutral in tone: global 2026/27 production was raised by 265,700 tons, while consumption increased by only 41,400 tons, with production growth significantly outpacing consumption; however, beginning stocks were simultaneously reduced by 198,100 tons, offsetting the production increase, resulting in a mere 19,600-ton increase in global ending stocks. The overall supply-demand balance remains tight, providing medium-term support for international cotton prices. Weather disruptions in overseas producing regions continue to support bullish sentiment in the external market, with ICE cotton likely to maintain a strong short-term trend.