Reserve Cotton Auctions Maintain Full Clearance, Signaling Sustained High Cotton Prices

On July 28, China National Cotton Reserves Corporation planned to sell 8,006.392 tons of reserve cotton, achieving a 100% transaction rate with an average price of 17,187.02 yuan per ton, down 88.31 yuan from the previous day. Imported cotton averaged 17,383.85 yuan/ton, while Xinjiang cotton averaged 16,724.88 yuan/ton. Cumulative sales reached 56,138.551 tons with a sustained 100% transaction rate.

Event Background

The consecutive 100% transaction rate of reserve cotton indicates strong restocking demand from downstream textile mills. Although cotton prices have slightly corrected, they remain at historically high levels. The price gap between imported and Xinjiang cotton reached 658.97 yuan per ton, reflecting international demand for higher-grade cotton.

From the transaction structure, imported cotton saw an average premium of 1,795.49 yuan per ton, while Xinjiang cotton averaged 1,219.68 yuan per ton, with imported cotton's premium nearly 48% higher. This suggests textile mills prefer imported cotton, possibly due to better fiber length and strength, confirming tight supply of high-grade domestic cotton.

Industry Impact

The sustained full clearance of reserve cotton affects multiple supply chain segments. For spinning mills, current procurement costs approach 18,000 yuan per ton (3128B equivalent), directly pushing up yarn production costs. If end-use fabric prices cannot pass through costs, mill margins will compress.

For upstream cotton growers, high reserve cotton prices signal favorable expectations for new crop marketing. However, the lower average price of Xinjiang cotton compared to imports may reflect quota constraints or transportation cost considerations, indicating rigid demand for domestic cotton.

From regional industrial cluster reactions, textile hubs in the Yangtze and Yellow River basins typically face low season in July-August, but the rush for reserve cotton suggests a non-seasonal uptick. This may imply downstream orders haven't shrunk significantly, or mills are pre-stocking for autumn-winter orders.

Practical Recommendations

For Buyers - Monitor daily reserve cotton average prices and 3128B equivalent; if persistently above 17,500 yuan/ton, consider staggered small-lot purchases to average costs. - Given the high premium on imported cotton, prioritize using quotas for imported cotton to obtain better fiber quality. - Xinjiang cotton premiums are relatively moderate; increase its share in cotton blending to reduce raw material costs.

For Foreign Trade Companies - International cotton prices are increasingly correlated with domestic reserve cotton prices; closely watch ICE cotton futures to adjust export quotes promptly. - If RMB exchange rate fluctuates significantly, use forward settlement or hedging tools to avoid exchange losses. - Include raw material price fluctuation clauses in long-term contracts with overseas clients to prevent order losses from sharp cotton price increases.