The floor price for reserve cotton sales has been declining for consecutive weeks, with the fifth-week price (August 17-21) for standard grade 3128B dropping to 16,763 yuan per ton. This marks a notable decrease from previous weeks, indicating a downward shift in the domestic cotton price center, which may temporarily ease raw material cost pressures for downstream textile mills.
Background
China National Cotton Reserves Corporation started the 2026 central reserve cotton sales on July 20, announcing a weekly floor price for standard grade cotton. The fifth-week floor price was determined based on national regulations and the annual sales announcement, and calculated with reference to the quality price difference table issued by the China Cotton Association. Actual transaction prices are determined batch by batch based on certified inspection results and quality differentials.
The consecutive decline in floor prices is not an isolated phenomenon; it reflects the rebalancing of supply and demand in both domestic and international cotton markets. Weakening international cotton prices, stronger expectations of new domestic cotton harvest, and slower-than-expected recovery in downstream textile orders have jointly suppressed cotton price upside. As a market regulation tool, the floor price changes directly reflect policy expectations for price trends.
Industry Impact
For textile mills, a lower floor price means reduced procurement costs, but the more critical issue is adjusting procurement strategy. With cotton prices in a downward channel, a one-time large purchase may lead to inventory depreciation risk if prices continue to fall. Conversely, over-waiting may miss the low-price window. Therefore, phased purchasing and controlling inventory cycles become a safer choice.
From an industry chain perspective, falling cotton prices benefit yarn and grey fabric producers by improving their profit margins. However, whether terminal demand can keep up remains key to realizing the benefits of lower raw material costs. If downstream garment orders remain weak, yarn prices may follow suit, limiting profit improvement. Thus, buyers must closely monitor downstream order changes to avoid converting raw material inventory into finished goods pressure.
Additionally, the reserve cotton floor price is closely related to the domestic-international cotton price gap. Currently, the gap is narrowing, reducing the cost advantage of imported cotton, and some mills may shift to reserve or domestic cotton. This substitution effect will affect imported cotton volumes and in turn influence international cotton prices. Textile mills should comprehensively evaluate exchange rates, freight, tariffs, and other factors to rationally allocate domestic and imported cotton.