In the second week of July, domestic and international cotton prices weakened simultaneously, driven by rapid shifts in supply-side expectations. The average settlement price of Zhengzhou Cotton Futures main contract fell to 16,057 yuan/ton, down 148 yuan/ton week-on-week, a decline of 0.9%. The National Cotton Price B Index averaged 17,659 yuan/ton, down 80 yuan/ton. Internationally, the NY Cotton Futures main contract averaged 80.37 cents/lb, down 0.1%, but the Import Cotton Index (M) rose 1.6% to 89.32 cents/lb due to exchange rates and freight, equivalent to an import cost of 14,762 yuan/ton. The domestic-foreign price spread narrowed by 310 yuan/ton, or 9.7%, enhancing the relative competitiveness of domestic cotton.
Three Bearish Factors Converge on Supply Side The release of state reserve cotton was the biggest variable in the domestic market this week. On July 15, China National Cotton Reserves Corporation announced competitive bidding sales starting July 20, limited to textile mills. The first week's floor price of 16,291 yuan/ton was significantly lower than spot prices, directly easing supply tightness expectations. After the announcement, Zhengzhou cotton futures fell sharply, with the policy signal's speed exceeding market expectations.
Internationally, US cotton export data hit a seasonal low, becoming another key bearish factor. For the week ending July 9, export sales and shipments remained weak, compounded by reduced drought area in major producing regions. More notably, Brazil's cotton exports surged—data from SECEX showed daily exports of about 10,000 tons in the second week of July, up 81.5% year-on-year. With record production and price advantages, Brazil has solidified its position as the world's largest cotton exporter, continuously pressuring US cotton.
Global supply-demand dynamics are also shifting. The USDA July report showed the 2026/27 global cotton production gap narrowing by 223,000 tons month-on-month, with ending stocks of 15.51 million tons remaining relatively high. This easing of supply tightness structurally pressures international prices.
Consumption Resilience Provides Floor Support Despite concentrated supply-side pressure, domestic consumption data offers a floor for cotton prices. National Bureau of Statistics data on July 15 showed H1 2026 retail sales of consumer goods up 1.3% year-on-year, with apparel, footwear, and textile retail sales above designated size up 6.7% (June: +3.9%), significantly outpacing overall retail growth. The resilience of downstream demand in the textile industry exceeded market expectations, explaining why spot price declines were far smaller than futures.
Textile mill operating rates confirm this judgment. In early July, average operating rates reached 79.7%, up 1.1 percentage points year-on-year, while 46.3% of mills planned to purchase cotton, up 9.9 percentage points. This suggests that while cotton prices face short-term pressure, actual demand has not contracted, with some mills viewing price corrections as restocking opportunities.
Macro and Weather Variables Remain a Concern US tariff policy remains the core external variable affecting cotton trade flows. The USTR plans to impose 25% tariffs on thousands of Brazilian goods starting July 22, including apparel. If implemented, this could weaken the Brazilian real, enhancing Brazil's cotton export competitiveness and further pressuring US cotton prices. Meanwhile, a New York Fed survey showed over 40% of firms plan to pass on tariff costs through price increases, while Middle East tensions pushed Brent crude above $88/barrel, reigniting global inflation expectations.
Weather factors are equally critical. As of July 12, US cotton crop conditions rated good-to-excellent at 44%, down 2 percentage points week-on-week, with about 46% of growing areas experiencing drought. Texas and other key regions are in the early stages of squaring, flowering, and boll-setting, with the next 2-3 weeks critical for yield formation. Domestically, Xinjiang has favorable sunlight and temperature, but sustained high heat needs monitoring. Hebei cotton is growing rapidly, but late-season boll counts may be limited. India's monsoon rainfall distribution remains uneven, with July-August weather being the core variable for new crop output.