China Reserve Cotton Management Co., Ltd. announced that the 2026 central reserve cotton sales will begin on July 20, with the first week's base price for standard grade 3128B set at 16,291 yuan/ton. This price is calculated in accordance with national requirements and the China Cotton Association's latest quality differential table. Actual daily base prices will be adjusted based on inspection results and the quality differential table.
Policy Floor Signal: Support Intention, Not Full Rally
The 16,291 yuan/ton base price, compared to the Zhengzhou cotton futures main contract trading in the 15,500-16,000 yuan/ton range, represents a premium of about 700-1,200 yuan/ton. This effectively draws a 'hard floor' for the spot market. The textile industry analysis suggests this move aims to stabilize market expectations and prevent excessive price declines that would harm cotton farmers and upstream planting incentives. However, the policy floor does not guarantee a market bottom—the actual transaction rate and price of reserve cotton will be the true test of supply-demand dynamics.
Industrial Belt Reactions: Divergent Procurement Strategies
Feedback from major cotton producing and marketing regions like Xinjiang, Shandong, and Hebei shows mixed reactions. Some holders are holding back or raising offers, believing the floor price caps downside risk. In contrast, textile mills are generally cautious, planning to purchase only as needed. The core challenge for mills remains insufficient downstream orders, yarn inventory buildup, and tight cash flow. For them, raw material costs are important, but terminal demand recovery is more critical. Therefore, early reserve cotton sales will likely see 'base price transactions mainly, with limited premium'.
Domestic-Foreign Price Spread and Import Substitution Pressure
Another key variable is the domestic-foreign cotton price spread. International cotton prices, due to global production increase expectations and slowing demand, hover around 70 cents/lb, translating to an import cost of about 13,500-14,000 yuan/ton (including tax). The spread between domestic and imported cotton has widened to over 2,000 yuan/ton. In this context, the 16,291 yuan/ton reserve base price offers no price advantage over imports. Textile mills with access to 1% tariff quotas or sliding duty quotas will prefer imported cotton, potentially dampening reserve cotton transaction volumes, especially during quota utilization windows.
Quality Premiums and Discounts Game
While the base price is set, actual transaction prices will depend on quality premiums/discounts. Market focus is on the proportion of high-grade cotton (e.g., 'double 28', 'double 29') in the reserve. A higher share could attract mills spinning fine counts, boosting transaction prices; conversely, a dominance of lower grades could slow transactions. Historical reserve structures show that after years of rotation, the share of high-quality cotton has declined, potentially becoming a hidden factor limiting transaction activity.