Zhengzhou cotton futures ended the first week of August with a 2.95% weekly gain, touching a one-month high of 16,305 yuan per ton before paring gains in the afternoon. The rally was not one-sided but a tug-of-war among three forces: heat-driven output cuts in Xinjiang, state reserve sales, and weak off-season demand. For the textile supply chain, understanding the balance of these forces matters more than predicting price levels.
Weather Disruption: Output Expectations Become the Biggest Variable
Field surveys by the China Cotton Association show that by end-July, most cotton in the country was in full bloom, while persistent high temperatures in Xinjiang reduced pollen vitality and increased boll shedding, directly threatening yields. The Yellow River basin saw adequate light and rain, while the Yangtze basin suffered waterlogging from heavy rainfall, showing regional divergence. Weather premiums are inherently impulsive in agricultural pricing, but this year's prolonged heat in Xinjiang has widened market disagreements on crop loss, providing a floor for cotton prices. Notably, August weather remains the key window for final yields, and any adverse forecast could reignite the rally.
Industry Impact: Off-Season Destocking vs. Peak-Season Expectations
Demand has not shown a clear improvement. Major spinning mills have seen rising finished goods inventories and reduced operating rates, with raw material purchases limited to essential restocking—a typical off-season pattern. However, expectations of concentrated autumn/winter orders in the "golden September, silver October" season are heating up, and some large mills have begun bulk buying to lock in costs. This "not-so-weak off-season" procurement behavior provides temporary support to prices, but if peak season orders disappoint, early stockpiling could turn into inventory pressure. For fabric and grey cloth makers, a prudent strategy is to buy on demand within the current range, while closely monitoring order intake to avoid overstocking before expectations are confirmed.
Event Anchor: The "Ballast" Effect of Reserve Sales
Since the start of reserve cotton auctions on July 20, daily listings have stabilized at around 8,000 tons, with 100% turnover. On August 6, the average price was 17,070 yuan/ton, with the 3128-equivalent price at 17,692 yuan/ton, down slightly from the previous day. The continuous release of reserves effectively supplements market supply and caps excessive price increases, as seen in the afternoon pullback. For mills, reserve supply enhances cost predictability, especially for small and medium enterprises, making participation in auctions a cost-effective way to secure mid-to-low grade cotton. However, daily price changes reflect market divergence, so mills should adjust bidding strategies based on their cotton mix.
Overseas, adverse weather in the U.S. and other major producing regions raised risks of lower yields and tighter supply, with ICE December cotton settling up 0.17% at 83.16 cents/lb. The stronger external market supports domestic prices but compresses import margins. In summary, Zhengzhou cotton is likely to remain range-bound, capped by reserve sales and supported by weather and cost factors. A breakout would require either a significant weather deterioration in Xinjiang or a notable surge in peak-season orders.