Reserve Cotton Floor Price Keeps Falling, Textile Mills Reassess Procurement Strategy

At 17,228 yuan per ton for grade 3128B, the floor price for the 7th week (August 31 - September 4) of 2026 central reserve cotton sales marks another step in a gradual downward trend. This reflects ample domestic supply and sluggish demand recovery. For textile mills, it eases raw material costs but also signals market weakness, prompting a reassessment of procurement strategies.

Market Context

Reserve cotton sales began on July 20, with weekly floor price announcements. The 7th week floor price continues a slight decline from previous weeks, indicating policy guidance through price signals. Commercial cotton inventories remain higher than last year, and the supply window before new crop arrivals is still wide. Meanwhile, downstream orders are mostly short-term and small, keeping mills cautious in restocking, which together pressure cotton prices.

Feedback from industrial clusters in Xinjiang, Shandong, and Henan shows ginners are actively selling, but textile mills are adopting a hand-to-mouth procurement strategy, maintaining only 7-10 days of raw material inventory. Even with lower floor prices, mills are unlikely to purchase in bulk without substantial order improvements. The price decline is gradually transmitting to yarn quotations, with some 32s and 40s carded yarn prices easing by 50-100 yuan per ton, benefiting downstream weaving and apparel manufacturers.

Industry Impact

The lower floor price directly reduces cotton costs for mills. Compared with early July, raw material costs have dropped by about 200-300 yuan per ton, translating to a cost reduction of roughly 150 yuan per ton for 32s yarn. For small and medium-sized mills with gross margins below 5%, this improvement can significantly boost cash flow. However, in a falling price cycle, inventory depreciation risks rise, and mills that stocked at high prices may face book losses, accelerating industry divergence.

For traders and exporters, lower cotton prices enhance export competitiveness. Companies exporting cotton yarn and fabrics can optimize quotes to win more orders. But exchange rate fluctuations and shipping costs remain variables. It is advisable to lock in raw material costs for long-term contracts to avoid profit erosion from potential price rebounds. Reserve sales will continue until end-September; if floor prices keep falling, market expectations of further weakness could curb speculative hoarding, supporting market stability.

Practical Recommendations

For Procurement Managers - Build inventory in batches rather than one large purchase, taking advantage of weekly price adjustments. - Monitor quality difference tables to select cost-effective batches. - Negotiate floating price clauses with suppliers to hedge against future price volatility.

For Exporters - Include price adjustment mechanisms in quotations or use forward exchange and raw material locking to control margin fluctuations. - Leverage low cotton prices to promote high-value products like high-count yarn and functional fabrics overseas. - Track reserve sales progress and domestic-international price gaps to adjust sourcing between domestic and imported cotton.