The domestic cotton market is undergoing a subtle pricing game. The China National Cotton Reserves Corporation announced a floor price of 16,480 yuan per ton for the fourth week (August 10-14) of reserve cotton sales, based on the standard grade 3128B. This marks a decline of about 200 yuan per ton from the opening week, the third consecutive weekly drop, signaling a clear policy intention to cool cotton prices. For textile mills, this means marginal improvement in procurement costs, but also implies cautious expectations for future market trends.
The Supply-Demand Logic Behind Falling Floor Prices
The reserve cotton floor price is not set arbitrarily; it is calculated based on recent domestic and international cotton market prices, quality differentials, and other factors. The consecutive declines directly reflect the weak spot market—insufficient downstream orders, rising yarn inventories, and low willingness among mills to replenish stocks, all leading to weak demand. Meanwhile, new crop cotton growth is generally favorable, with expectations of a bumper harvest, increasing supply-side pressure. With weak supply and demand, policy has followed market trends to lower the floor price, aiming to accelerate destocking while avoiding excessive market intervention.
It is worth noting that despite the lower floor price, actual daily transaction prices are still based on notarized inspection results and the quality differential table issued by the China Cotton Association. This means actual prices for different grades and lengths will vary, and companies should not focus solely on the standard-grade floor price but should calculate actual procurement costs based on their own cotton needs.
Transmission Effects on the Textile Industry Chain
The most direct impact of the lower floor price is reduced raw material costs for textile mills. Based on a floor price of 16,480 yuan per ton, plus handling and transportation fees, the delivered cost is approximately 16,800-17,000 yuan per ton, which is 300-500 yuan lower than recent market prices. For enterprises producing mainly 32s and 40s combed cotton yarn, raw material costs per ton can be reduced by about 400 yuan, providing a "profit lifeline" amid weak yarn prices.
However, cost reductions have not fully translated into profit improvements. Downstream fabric mills and garment companies are pressuring prices, leaving limited room for yarn price increases. Most textile enterprises remain in a defensive "produce-to-order" mode, maintaining only essential purchases rather than significantly restocking. This wait-and-see attitude in turn suppresses cotton price rebounds, creating a cycle of "the more prices fall, the more buyers wait."
From a regional perspective, ginners and traders in major cotton-producing areas such as Xinjiang, Shandong, and Henan face greater pressure. Lower floor prices compress their profit margins, and some traders who previously stocked up at high prices face losses. In contrast, coastal textile clusters like Nantong and Shaoxing adopt more flexible procurement strategies, preferring just-in-time purchases to avoid inventory depreciation risks.
Outlook and Operational Strategies
In the short term, reserve cotton sales will continue until the end of September, with weekly floor prices potentially declining further. If downstream orders recover before the "golden September and silver October" season, cotton prices may stabilize; if demand remains weak, the floor price could fall further. For textile mills, it is not advisable to blindly chase price increases or be overly pessimistic. It is recommended to lock in low-cost supplies in batches based on order cycles, while monitoring the domestic-international cotton price spread and adjusting imported cotton usage accordingly.