2026 Central Reserve Cotton Sales Launch: Floor Price Formula Linked to Dual Indices, Tightened Self-Use Threshold for Spinners

The supply-demand balance in China's domestic cotton market is about to tilt decisively. China Reserve Cotton Management Co., Ltd. has officially announced that starting July 20, 2026, central reserve cotton will be listed for sale on each working day, with the floor price dynamically adjusted weekly. This move signals a clear liquidity release from the policy side to downstream textile mills after months of price negotiations.

Pricing Mechanism: Dual Index Weighted at 50% Each, Linking Domestic and International Markets

The core highlight of this round of reserve sales lies in the floor price calculation method. According to the announcement, the floor price is determined by a weighted average of the domestic cotton spot price index and the international cotton spot price index, each accounting for 50%. The domestic index takes the average of the China Cotton Price Index (3128B grade) and the National Cotton Price Index (3128B grade). The international index is based on the Cotlook A Index, converted after applying the exchange rate, a 1% tariff, and a 9% value-added tax.

This design means domestic cotton prices are no longer isolated from global trends. If international cotton prices fluctuate sharply due to weather conditions in overseas production areas or trade policy changes, the floor price will transmit these changes to the domestic auction process. For buyers, the weekly adjustment window creates a dynamic hedging anchor. If a mill can accurately predict the trend of the domestic-international price spread, it can gain an advantage in bidding.

Bidding Threshold: Only for Mill Self-Use, Resale Channel Completely Blocked

Compared to previous reserve sales, this announcement imposes stricter eligibility criteria. The sale is explicitly limited to textile mills, and the purchased reserve cotton must be used solely for the mill's own production, with the unified social credit code or tax registration number matching the bidding entity. Resale is strictly prohibited. Violators will not only have their bidding results invalidated but will also be permanently banned from participating in future reserve cotton transactions.

This clause directly cuts off the arbitrage chain for intermediaries. For pure traders, reserve cotton is no longer a product that can be flipped for profit. For mills, it means inventory decisions must return to genuine production needs. Small mills with low capacity utilization that relied on resale to supplement cash flow will face stricter compliance scrutiny.

Industry Transmission: Limited Short-Term Supply Increase, but Price Expectation Anchoring Effect is Significant

In terms of volume, the announcement does not set a specific upper limit for daily listed quantities, leaving it to be determined dynamically based on market conditions. This provides flexibility for policy implementation—if cotton prices remain high, the listed volume may increase; if the market stabilizes, it may be scaled down. Regardless, the launch of the reserve sale itself constitutes a psychological defense line: national reserve cotton inventory is sufficient to address any sudden supply gaps.

For downstream weaving and dyeing sectors, the entry of reserve cotton will alleviate the raw material tightness caused by the slow pace of new crop arrivals in recent months. High-grade cotton of 3128B and above may command a premium in bidding, while lower-grade cotton faces the risk of unsold lots. Mills need to closely monitor the floor price adjustment announcement released every Wednesday to formulate bidding strategies on the auction day.

Practical Recommendations

For Purchasing Mills - After the weekly floor price is announced, compare the price difference with the current spot market price for the same grade of cotton. If the reserve floor price is more than 3% below the spot price, prioritize locking in low-cost supply through bidding. - Prepare the enterprise's unified social credit code and tax registration number in advance to ensure the bidding account matches the self-use entity, avoiding transaction cancellation due to information mismatch. - Monitor weekly fluctuations in the Cotlook A Index and the RMB exchange rate, as these two variables directly affect the international weight component of the floor price, providing a basis for predicting next week's price trend.

For Foreign Trade Enterprises - If export orders have locked in forward prices, use reserve cotton bidding as a hedging tool to increase procurement volumes when the floor price is low, locking in raw material costs. - Note that the inspection report for reserve cotton is issued by the Fiber Quality Supervision Center. For export orders with specific fiber index requirements, verify in advance whether the batch quality meets the standards. - Closely monitor whether relevant national authorities subsequently adjust the sales arrangement. If economic conditions lead to a policy shift, adjust procurement pace accordingly.