The 2026 central reserve cotton sales kicked off on July 20, with the first-week base price set at 16,291 yuan per ton, notably lower than market expectations, opening a rare procurement window for downstream textile mills.
Price Signal and Market Logic
The base price of 16,291 yuan per ton is based on the standard grade 3128B. China National Cotton Reserves Corporation announces a weekly base price in accordance with national regulations and the sales notice. This price signal directly reflects the policy stance on current cotton prices: amid a loose supply-demand balance in domestic and international cotton markets and sluggish downstream order recovery, moderately lowering reserve selling prices aims to guide market expectations, prevent excessive price drops from hurting cotton farmers, and ease cost pressures on textile mills.
Daily batch prices are determined by adjusting the standard base price according to cotton inspection results and the quality differential table published by the China Cotton Association. This means actual transaction prices vary by quality, requiring mills to select batches precisely based on their product needs.
Industry Impact and Transmission Channels
The lower reserve selling price directly reduces raw material costs for textile mills. For small and medium-sized mills focused on pure cotton products, raw materials typically account for over 60% of production costs. A 100 yuan per ton drop in base price could expand profit margins by 1-2 percentage points.
Along the supply chain, lower cotton prices will drive down cotton yarn prices, then gray fabrics and finished fabrics. For export-oriented firms, this means stronger export price competitiveness, especially against Southeast Asian rivals facing similar raw material pressures. However, sustained low cotton prices may cause downstream buyers to delay purchases in anticipation of further declines.
Additionally, reserve sales exert downward pressure on the domestic spot cotton market. Xinjiang cotton and local cotton spot prices may follow, strengthening the holding sentiment of farmers and ginners. By rotating reserves, policymakers aim to both supplement market supply and regulate prices—a delicate balancing act.