Cotton Prices at Highs Intensify Bidding: Reserve Sales Enter Critical Game Period

A 100% transaction rate for six consecutive weeks is the most straightforward signal that the domestic cotton market remains tight. During Aug 24-28, China National Cotton Reserves Corporation listed 40,142 tons, all sold, with an average price of 17,463 yuan/ton, continuing an upward trend. The standard-grade equivalent price reached 18,172 yuan/ton, with an average premium of 1,184 yuan/ton. Behind these figures lies strong buying appetite driven by pre-season restocking and weather speculation.

Background

The current reserve sales program started on July 20 and has run for six weeks through Aug 28, with cumulative listings of 240,684 tons and a 100% transaction rate. The cumulative average price stood at 17,264 yuan/ton, with a standard-grade equivalent of 17,911 yuan/ton and an average premium of 1,434 yuan/ton. Notably, the weekly highest price reached 18,300 yuan/ton while the lowest was 17,090 yuan/ton, a spread of 1,210 yuan, indicating diverging bidding strategies among mills.

By category, the price gap between Xinjiang cotton and imported cotton widened further. Xinjiang cotton averaged 17,413 yuan/ton (standard-grade 18,039 yuan/ton, premium 1,051 yuan), while imported cotton averaged 17,482 yuan/ton (standard-grade 18,220 yuan/ton, premium 1,232 yuan). The premium for imported cotton exceeded Xinjiang by about 181 yuan, reflecting stronger preference for imported quality amid rising domestic and international prices.

Industry Impact

The combination of high transaction rates and rising prices sends a clear signal: the supply tightness is unlikely to fundamentally reverse before the new crop arrives. Despite reserve sales narrowing the spot gap, structural shortages persist, especially for high-grade cotton. Super El Niño weather speculation continues to heat up, linking domestic and international prices and reinforcing supply concerns.

For mills, cotton prices at yearly highs significantly increase restocking costs. Yet with 'golden September and silver October' order deliveries pending, mills must accept high prices. This passive buying squeezes downstream margins, potentially pushing small and medium mills into 'loss-making orders.' With less than a month before new cotton hits the market, bulls bet on weather-driven output cuts and demand recovery, while bears expect price corrections after new supply arrives.

From a regional perspective, the Xinjiang-imported price gap directly influences procurement strategies in textile hubs like Shandong, Henan, and Jiangsu. Some mills have begun adjusting their cotton mix, increasing imported cotton ratios to hedge against Xinjiang price volatility. If this trend persists, it will support import demand and affect international cotton prices.

Practical Advice

For Buyers - Given high prices, consider phased purchasing to avoid chasing peaks; use forward contracts to lock in some costs. - Monitor the Xinjiang-imported spread; if it widens, increase imported cotton share to optimize cost structure. - Track new crop progress and weather; if a supply surge appears imminent, delay restocking to await a price pullback.

For Exporters - Incorporate cotton price volatility into quoting formulas; adopt floating pricing or price adjustment clauses to hedge raw material risks. - Use reserve sales data as a negotiation reference, showing clients current cost pressures to secure better contract terms. - Watch the domestic-international price linkage; if global prices strengthen, lock in overseas cotton supplies early to avoid further cost escalation.