On July 20, a new round of reserve cotton releases will begin. The implementation rules issued by CNCRC show that sales will be listed on each legal working day, with total volume and end date unspecified, and daily scale adjusted flexibly. This marks the policy side's formal intervention in supply-demand adjustment during the old-new cotton season transition.
The floor price uses a dual-anchor mechanism with equal weight for domestic and international cotton spot indices, adjusted weekly. Based on recent price spreads, the floor price is about 16,216 yuan/ton, offering a clear advantage over current spot prices. Trading rules are tightened: only textile enterprises can bid, and purchased cotton is for self-use only, with resale prohibited. Violators face permanent disqualification. This means traders and speculative funds are completely excluded, making bidding more rational.
Supply Gap vs. Off-Season Demand
The core background for the release is the rapid destocking of domestic commercial inventories. Public data shows that inventories have fallen from a peak of 5.6981 million tons at the beginning of the year to 2.8388 million tons, a drop of over 50%. Xinjiang stocks are only 1.6712 million tons, with high-grade spot resources gradually tightening. With nearly two months until the new cotton harvest, there is an inherent risk of temporary supply shortages.
However, downstream textile demand support is notably weak. The industry has entered a traditional off-season, with insufficient new orders. Operating rates in major spinning regions have fallen to 73.1%, and yarn inventories have piled up to 30 days. Enterprises only purchase for immediate needs, with little willingness to stockpile. After new reserve cotton enters the market, it will be difficult to form strong buying power to absorb the incremental supply in the short term.
Global Production Cuts Bolster Medium-Term Floor
Global fundamentals provide solid support for long-term cotton prices. The latest USDA report shows global cotton production for 2026/2027 is estimated at 25.53 million tons, down 3.8% year-on-year, shifting the supply-demand balance to a tight equilibrium. Meanwhile, the current domestic-international price spread remains high at 3,010 yuan/ton. Under the dual-weight pricing mechanism, international price fluctuations directly affect the reserve cotton floor price. A stronger international market will increase release costs, further limiting downside.
Xinjiang cotton fields are in a critical boll development stage, with sustained high temperatures since July stressing growth, fueling expectations of a new-season production decline. These factors together make the medium-term price floor relatively stable.
Market Battle: Short-Term Pressure, Long-Term Bullish
The bearish impact of the release has been partially priced in. On July 15, the main Zhengzhou cotton futures contract closed at 16,075 yuan/ton, down 45 yuan. In the short term, as the first round of bidding begins on July 20, spinning mills generally have low raw material inventories. Demand for regular yarn production is strong, and participation enthusiasm is high, with initial bids possibly at a premium. This rigid demand can temporarily support spot and futures prices. Combined with the Xinjiang heat wave’s production cut expectations, a deep decline is unlikely.
But as the release continues, accumulated supply pressure will gradually weigh on near-month contracts. Policy limits upside potential, and the 16,000 yuan/ton mark will be repeatedly tested. In the medium term, the release only temporarily supplements supply; it cannot change the core logic of global production cuts and scarce high-quality domestic cotton. As the release winds down, market focus will shift to Xinjiang cotton growth, new-season opening prices, and downstream “golden September and silver October” peak season orders.