In July 2026, a notable signal emerged from Xinjiang's cotton processing sector: ginning mills are intensively accelerating equipment upgrades and maintenance. The scale and pace of this activity suggest a deeper strategic adjustment for the upcoming procurement season. Unlike previous years, the scope of technological upgrades has expanded significantly, with older dust removal, ginning, and lint cleaning machines being phased out rapidly, reflecting mills' efforts to offset rising acquisition costs through improved cotton quality.
Industry Impact
The direct driver of these upgrades is the substantial growth in cotton procurement and processing volumes in the 2025/26 season, along with improved operational profits. Mills in major production areas like Aksu, Kashgar, and Changji report plans to raise seed cotton procurement standards, strictly control impurity and foreign fiber content, targeting a "premium for quality" strategy to achieve profit growth despite potentially lower volumes. Whether this strategy succeeds depends on downstream textile mills' willingness to accept higher prices and the efficiency of price transmission.
In stark contrast to the mills' caution, individual farmers and large cotton growers in Xinjiang have raised their price expectations for the 2026/27 season to 7.50 yuan/kg or above. Most mills, however, consider opening prices above 7.0 yuan/kg as too high, with the 7.0-7.50 yuan/kg range posing significant risk for processors. This divergence fundamentally reflects differing assessments of supply-demand fundamentals: farmers are bullish based on planting costs and last year's returns, while mills focus on supply-side pressures.
Supply-side data does not support significant price increases. The 2026 central reserve cotton sales program has already started, becoming a key replenishment source for textile mills from July to September. Meanwhile, China's cotton imports from January to May 2026 surged 91.06% year-on-year. As of end-June 2026, commercial cotton inventories nationwide and in Xinjiang remained higher than the same period last year. This suggests a tight supply scenario before the new crop is unlikely, limiting the momentum for speculators to drive up Zhengzhou Cotton Futures and seed cotton purchase prices.
However, a firming cottonseed market provides some support for price expectations. Drought in major U.S. soybean-producing areas has driven a rebound in soymeal and cottonseed meal prices. Combined with increased demand from oil mills in North China and Xinjiang, reduced outbound truck availability, and rising freight costs, cottonseed prices have remained stable to strong. This somewhat supports upward adjustments in seed cotton price expectations, but it is unlikely to change the overall loose supply landscape.