The floor price for reserve cotton sales has fallen below the 17,000-yuan mark, potentially easing raw material cost pressure for spinners. In the seventh week of the 2026 central reserve cotton sales program, the floor price for standard grade 3128B cotton was set at 17,228 yuan per tonne for the period August 31 to September 4, notably lower than in previous weeks. This price signal reflects the policy intent to stabilize the cotton market and ensure supply for textile mills.
Price Trends and Policy Logic
Reserve cotton sales began on July 20 and have now run for over six weeks. The floor price is adjusted dynamically based on market supply and demand. The 17,228-yuan level takes into account recent domestic spot price movements and the substitution effect of international cotton price fluctuations. For textile enterprises, a lower floor price directly reduces the threshold for participating in auctions, easing capital pressure especially for small and medium-sized mills.
However, the floor price is only a benchmark; actual transaction prices are determined based on cotton inspection results and the quality differential table published by the China Cotton Association. This means that different batches will have different final prices due to variations in grade, length, and strength. Enterprises must carefully compare quality differentials to avoid overpaying.
Industry Impact: Cost vs. Demand
The low-priced reserve cotton puts pressure on upstream ginners and traders. On one hand, it supplements market supply and curbs rapid spot price increases; on the other hand, traders holding high-priced cotton may face inventory pressure and be forced to cut prices, pulling down the overall cotton price center. For textile mills, lower raw material costs are beneficial, but weak downstream orders and high finished goods inventories make mills cautious about purchasing.
From a chain perspective, lower cotton prices improve spinning margins, but if terminal demand remains weak, profit improvements may not translate into actual purchases. Industry data shows that yarn prices have not fallen as much, and theoretical processing margins have recovered somewhat, but operating rates have not risen significantly, indicating ongoing caution. In addition, low international cotton prices make imports more attractive, potentially diverting demand away from reserve cotton.