Reserve Cotton Sold Out at Slightly Lower Average Price, Revealing Market Dynamics

All lots sold, average price slightly down. The July 21 reserve cotton sales data sends a clear signal: textile mills still have restocking intentions, but price sensitivity is rising.

Background

On July 21, China Reserve Cotton Management Co., Ltd. offered 8,045.455 tons of reserve cotton for sale, achieving a 100% sales rate. The average transaction price was 17,480.36 yuan/ton, down 7.69 yuan/ton from the previous trading day. The lowest price was 17,070 yuan/ton, while the highest reached 18,450 yuan/ton, a spread of 1,380 yuan/ton, reflecting quality and market acceptance differences among batches.

By structure, 6,904.149 tons of imported cotton were offered and fully sold, at an average price of 17,518.81 yuan/ton, equivalent to 18,112.46 yuan/ton for Grade 3128B, with an average premium of 1,821.46 yuan/ton. Xinjiang cotton saw 1,141.306 tons offered and fully sold, at an average price of 17,247.74 yuan/ton, equivalent to 17,870.69 yuan/ton for Grade 3128B, with an average premium of 1,579.69 yuan/ton. Imported cotton averaged 271.07 yuan/ton higher than Xinjiang cotton, with a premium 241.77 yuan/ton larger.

What does this mean? Imported cotton is still viewed by downstream mills as superior in quality, consistency, or spinnability, allowing for higher premiums. While Xinjiang cotton sold out, its pricing power is notably weaker, with buyers becoming more cautious.

Industry Impact

The sustained full sales of reserve cotton indicate that textile mills' raw material inventories remain low, with genuine restocking demand. However, the slight two-day decline in average price (down 7.69 yuan/ton on July 20) suggests the market is not optimistic about future prices. Mills prefer to lock in spot cotton from reserve auctions rather than building large positions in futures markets, reflecting a risk-averse stance toward price volatility.

The high premium for imported cotton is essentially a structural reliance of the domestic cotton textile chain on high-quality raw materials. Imported cotton often offers more stable fiber length, strength, and impurity levels, making it suitable for high-count yarns, combed yarns, and other high-value products. Against a backdrop of foreign orders shifting toward high quality and quick delivery, this preference is unlikely to reverse in the short term.

For Xinjiang cotton, although the sales rate was 100%, both average price and premium were lower than for imports. This is not due to poor quality, but rather market expectations of ample supply. The 2026/27 Xinjiang cotton crop is still expected to be large, and with continuous releases from reserves, buyers have stronger bargaining power. For Xinjiang producing regions, this means the sales window may shorten, and price competition will intensify.

Another noteworthy detail: the total volume offered was 8,045.455 tons, smaller than previous rounds that often exceeded 10,000 tons. This may be a deliberate move to fine-tune market pace—neither allowing prices to rise too fast nor letting oversupply hurt farmers' morale. The 'precision drip' approach of reserve cotton policy is becoming more evident.

Practical Recommendations

For Buyers - Current reserve cotton prices are in a relatively low range. Mills with restocking needs should accelerate purchases, especially for imported lots, as premiums may widen with subsequent concentrated demand. - Monitor the price gap between Xinjiang and imported cotton. If the gap widens beyond 300 yuan/ton, consider substituting some imported cotton with high-quality Xinjiang cotton to reduce costs. - Build a dynamic inventory model linking reserve auction pace, futures prices, and downstream orders to avoid concentrated restocking during low-auction periods.

For Foreign Trade Enterprises - High imported cotton premiums mean strong cost support for high-count and combed yarns in export orders. When quoting, include a floating clause for cotton raw material cost fluctuations to avoid margin erosion from rising prices after locking in orders. - Monitor the RMB exchange rate. Imported cotton is priced in USD; if the RMB depreciates, import costs will rise further. Use forward contracts or options to hedge currency risk in advance. - Use reserve auction data as a market thermometer. When the sales rate consistently falls below 80%, it often signals a cotton price downtrend, allowing delayed purchases. The current 100% rate indicates firm demand, so excessive waiting is not advisable.