Xinjiang Ginning Mills Upgrade Capacity as New Cotton Opening Price Forecasts Diverge: Supply-Demand Game Enters Critical Phase

As mid-July 2026 arrives, the Xinjiang cotton industry chain enters the final preparation phase for its annual 'big exam'—the new cotton purchase season. Unlike previous years, the widening gap in price expectations between ginning mills and growers is pushing this game into a more uncertain territory.

Capacity Upgrades and Expectation Divergence

Since early July, ginning mills in Aksu, Kashgar, and Changji have successively initiated equipment maintenance, upgrades, and fire safety checks. This round of upgrades is not routine—some cotton enterprises report that processing volumes for the 2025/26 season grew significantly compared to the previous two years, improving profitability and enabling investment in replacing old dust removal, ginning, and lint cleaning machines. The clear signal: mills are preparing for higher seed cotton purchase volumes in 2026/27, aiming to improve lint quality, reduce impurities and foreign matter content, and achieve 'quality-driven profit growth' under the 'quality cotton, quality price' policy framework.

However, a rare rift has emerged between upstream and downstream players regarding opening price expectations. Individual farmers and large growers in Xinjiang have generally raised their psychological price to 7.50 yuan/kg or above, partly buoyed by firm cottonseed prices. Drought in major U.S. soybean regions has driven soybean meal rebounds, coupled with increased demand from oil mills in North China and Xinjiang, and a shortage of trucks for cottonseed shipments out of Xinjiang leading to higher freight costs, all supporting cottonseed prices and indirectly raising growers' expectations for seed cotton.

But ginning mills are notably cautious. Most believe that an opening price above 7.0 yuan/kg is already on the high side, and actual purchase prices in the 7.0-7.50 yuan/kg range would pose significant operational risks. This conservative stance is not baseless—it stems from a clear-eyed assessment of a loose supply situation.

Supply-Side Pressure: Reserve and Import Cotton Double Squeeze

From a supply perspective, the likelihood of tight domestic cotton supply before the new crop arrives is slim. An assessment from a medium-sized mill in Shaya, Aksu, is representative: the 2026 central reserve cotton sales program has already started, making reserve cotton the most important source for textile mill replenishment from July to September, directly diverting urgent demand for new cotton.

More striking is the import data—from January to May 2026, China's cotton imports surged 91.06% year-on-year. Such strong import growth, combined with current national and Xinjiang commercial cotton inventories still slightly higher than last year, leaves bulls with insufficient momentum to push up Zhengzhou cotton futures and thus inflate seed cotton purchase prices. For ginning mills, this means that after the new crop hits the market, lint selling prices may face dual pressure from reserve and imported cotton, amplifying the risk of high-priced seed cotton purchases.

Cottonseed Prices: An Underestimated Variable

In the generally bearish supply landscape, cottonseed prices stand out as a rare positive factor supporting seed cotton price expectations. As noted, soybean meal rebounds have lifted cottonseed meal, while increased oil mill demand and higher outbound freight costs have pushed cottonseed prices higher. Cottonseed is a key by-product revenue source for ginning mills, and its firmness gives them greater price tolerance in seed cotton purchases.

But this support is fragile. If U.S. soybean weather improves or global oilseed markets turn, cottonseed prices could quickly retreat, removing this buffer and potentially forcing mills to further tighten their purchase strategies.

Practical Recommendations

For Buyers - Monitor reserve cotton auction pace and prices from July to September as a pricing benchmark for new cotton purchases. If reserve auction average prices consistently fall below the Zhengzhou cotton futures main contract, it indicates ample spot supply, potentially giving more room for price negotiation after the new crop opens. - For high-grade lint needs, prioritize locking in forward contracts with mills that have upgraded equipment and committed to reducing impurities and foreign matter, to capture the 'quality premium'. - Be wary of high prices in the early opening phase due to grower hoarding. Consider concentrating purchases in mid-to-late September when large volumes of new cotton hit the market and the game between mills and growers becomes clearer.

For Foreign Trade Enterprises - With imports up 91% YoY, the linkage between international and domestic cotton prices is strengthening. Closely monitor ICE cotton futures and U.S. weather, and use spreads for hedging. - Rising cottonseed outbound freight may increase Xinjiang cotton's comprehensive cost, but reserve and imported cotton will suppress lint price increases. When pricing export orders, consider using the reserve auction average price as a cost floor. - Watch output and policy changes in major competitor markets like India and Pakistan, as their price fluctuations may transmit through import channels to the domestic market, affecting Xinjiang cotton's export competitiveness.