Cotton Prices Drop Below 17,000 Yuan: The 1.2% Decline in Mid-July Signals New Cost Negotiations for the Textile Chain

In late July, the National Bureau of Statistics released its monitoring data on the market prices of 50 key means of production in national circulation. The data shows that in mid-July 2026, the average price of cotton (lint, white cotton grade 3) stood at 16,777.3 yuan per ton, down 203.3 yuan from early July, a decline of 1.2%. This marks the first clear breach of the 17,000 yuan per ton threshold in 2026.

Background

This price monitoring covered 9 major categories and 50 key production materials, with 26 products rising, 19 falling, and 5 unchanged. As the core raw material for the textile industry, cotton's price movement carries significant industry barometer significance. While a 1.2% decline is not severe, given the backdrop of slowing global textile demand recovery and high domestic social cotton inventories, this downtrend may not be short-lived.

Industry public data indicates that weather conditions in the Xinjiang cotton region are generally normal, with new cotton growth slightly ahead of schedule, leading to a market expectation of a looser supply for the 2026/27 season. Meanwhile, downstream cotton spinning enterprises generally report lower order volumes compared to last year, with operating rates at some small and medium-sized mills dropping from 85% in May to around 78% currently. Weak demand is the core factor suppressing cotton prices.

Industry Impact

Cotton prices falling below 17,000 yuan have notable transmission effects across the supply chain.

For spinning mills, lower raw material costs theoretically improve profit margins, but in practice, yarn prices often fall in tandem. If mills had previously purchased high-priced cotton inventory, the current price decline directly leads to inventory write-downs, squeezing cash flow. Some mills may choose to reduce operating rates to digest high-cost inventory, further reducing cotton purchase demand and creating a negative feedback loop.

For weaving and garment enterprises, falling cotton prices mean lower fabric costs, allowing buyers to negotiate more favorable contract prices. However, caution is needed: if cotton prices continue to decline, downstream customers may adopt a 'buy on rising, not on falling' mentality, delaying orders and exacerbating inventory buildup across the chain.

From a foreign trade perspective, lower Chinese cotton prices help enhance the price competitiveness of cotton textiles in international markets. However, retail inventories in major textile-consuming markets—the EU and the US—remain high, and restocking willingness is weak. Therefore, whether cost advantages translate into actual export growth depends on the pace of overseas demand recovery.

Practical Recommendations

For Buyers - Monitor the sustainability of the cotton price trend. If prices continue to fall in late July to early August, consider moderately increasing spot purchases to lock in lower costs. However, single purchase volumes should not exceed two months' usage to hedge against price rebound risks. - Negotiate 'floating price' clauses with yarn suppliers, linking yarn settlement prices to cotton price fluctuations to avoid overpaying on purchase contracts due to falling raw material costs. - Utilize futures markets for hedging. For long-term orders already signed but not yet delivered, establish short positions on the Zhengzhou Cotton Futures to hedge against further raw material price declines.

For Foreign Trade Enterprises - Proactively inform overseas customers about the drop in Chinese cotton prices, seeking to negotiate more favorable FOB quotes on existing orders to enhance competitiveness. - Monitor the combined effect of the RMB exchange rate and cotton prices. If cotton price declines coincide with RMB depreciation, export profits will receive a double boost—prioritize accepting long-term and large orders. - Leverage China's cotton price advantage against competitors in Southeast Asia and South Asia (where Indian and Vietnamese cotton prices remain relatively firm) to capture market share, especially in medium-to-low count yarns and standard grey fabric categories.