In mid-July, the domestic cotton spot market and overseas futures markets moved in opposite directions: 3128B grade cotton was quoted at 17,707 yuan/ton, down 0.12% from early July, while ICE cotton futures settled at 81.54 cents/lb, up 4.8%. The widening price gap reflects a mismatch among supply expectations, policy speculation, and end-user demand.
Heat and Growth Lag in Xinjiang Bolster Domestic Prices
Xinjiang cotton is now in the critical flowering and boll-setting stage. As of July 6, the region's cotton flowering rate reached 69.3%, but growth progress lagged 7.8 percentage points behind last year. Since July, persistent temperatures above 35°C in northern and southern Xinjiang have caused pollen inactivation, flower and bud shedding, and young boll drop. The southern region faces higher heat stress risk; if extreme weather continues, boll counts and yields could decline significantly.
Yield loss expectations provide strong support for domestic prices. Market concerns about the new crop are escalating, which is a key reason why spot prices remain weak but have limited downside.
Reserve Release Rumors and Weak Demand Cap Gains
Offsetting the yield support are persistent rumors of state reserve cotton releases—over 3 million tons reportedly under consideration. Although no official document has been issued, the expectation has been the main drag on Zhengzhou cotton futures. Notably, the market has partially priced in this bearish factor, limiting further downside.
Downstream textile demand remains weak in the traditional off-season. As of July 9, spinning mill operating rates in major regions stood at 73.1%, down 0.81 percentage points week-on-week. Finished yarn inventory cycles reached 30 days, up 1.69%. Mills are adopting a just-in-time procurement strategy, with little appetite for large-scale stockpiling. Rising finished goods inventories are squeezing mill margins and capping any price rebound.
Overseas Strength: USDA Report Neutral-Bullish, Weather Premium Persists
The international cotton market tells a different story. ICE cotton futures have steadily risen since early July, holding above the 80 cents/lb threshold. The USDA's latest global cotton supply-demand report was neutral-bullish: 2026/27 global production was raised by 265,700 tons, while consumption was raised by only 41,400 tons. However, beginning stocks were revised down by 198,100 tons, leaving global ending stocks up just 19,600 tons—a tight balance.
Weather disruptions in overseas producing regions continue to support bullish sentiment. With global inventories already low, any adverse weather event could trigger price spikes. The widening spread between domestic and foreign prices makes imported cotton less cost-effective, constraining mills' procurement decisions.
Outlook: No Clear Trend, Range-Bound Trading Likely
In summary, Xinjiang's heat-induced yield concerns and commercial stock depletion form a price floor, while weak textile demand and reserve release expectations cap upside. A clear trend is unlikely in the near term; prices will likely oscillate in a narrow range.