The floor price for the 4th week of central reserve cotton sales has been set at 16,480 yuan per ton (grade 3128B), marking another decline from the previous week. This is the latest sign of a downward price trend since the 2026 reserve sales began. For textile mills, this is not just a change in procurement costs but a signal to reassess inventory strategies.
What the Falling Floor Price Means
According to public data, the reserve cotton sales started on July 20, with a floor price announced weekly. The 4th week (August 10-14) dropped to 16,480 yuan per ton, lower than the levels seen in the first three weeks. This continuous decline reflects the policy intention to balance supply and demand and guide cotton prices back to a reasonable range.
For textile mills, a lower floor price directly reduces raw material costs, especially benefiting small and medium-sized spinning mills where raw materials account for a large share of costs. However, falling prices also suggest weak demand expectations, and buyers should be wary of inventory depreciation risks if they adopt a 'buy on rising, not on falling' mentality.
It is worth noting that the floor price is not fixed. The actual price for each daily batch is calculated based on the cotton inspection results and the quality differential table issued by the China Cotton Association. This means that even if the standard-grade floor price drops, actual transaction prices for different grades and qualities will vary, so enterprises should not simply use the floor price as the sole reference.
Procurement Logic Under the Quality Differential Mechanism
The reserve sales adopt a pricing model of 'standard-grade floor price plus quality differentials,' which is key to understanding the entire policy. The benchmark is grade 3128B, and actual batches are adjusted based on length, strength, micronaire, and other indicators, according to the 'Domestic Cotton Quality Differential Table.'
This mechanism ensures that prices more accurately reflect the intrinsic value of cotton, avoiding a one-size-fits-all approach. But for buyers, it means they need to calculate the cost-effectiveness of different batches more carefully, rather than just looking at a listed price.
From an industry perspective, the cotton textile chain is currently in a transition period between the off-season and peak season. Downstream fabric mills and garment companies have not yet seen a significant increase in orders, and yarn inventories have accumulated, which to some extent dampens the enthusiasm of spinning mills to purchase raw materials. The lower reserve floor price may stimulate some rigid replenishment demand in the short term, but a large-scale procurement wave will require a substantial recovery in end-consumer demand.
Transmission Impact Along the Industrial Chain
Adjustments in the reserve cotton floor price are not just a single event in the cotton market; they transmit along the entire chain. First, lower cotton costs for spinning mills enhance their competitiveness in yarn pricing. Second, weaker cotton prices may drag down yarn prices, affecting profit distribution in weaving, dyeing, and other segments. Third, for foreign trade enterprises, changes in raw material costs also affect their flexibility in export quotations.
However, this transmission is not instantaneous. Many mills have already locked in some raw material inventory through earlier purchases, so short-term cost changes mainly affect quotations for new orders. In addition, factors such as RMB exchange rate fluctuations and changes in ocean freight costs may offset some of the cost benefits. Therefore, enterprises should not overinterpret a single week's floor price change, but rather develop a stable procurement plan based on their own order cycles and inventory levels.