For the third consecutive week, the reserve cotton selling floor price has dropped, now at 17,228 yuan per ton. This price signal is reshaping procurement expectations among textile mills. For cotton-spinning enterprises where raw material costs account for up to 70% of total costs, every reduction in the floor price directly improves profit margins.
Background
China National Cotton Reserves Corporation initiated the 2026 reserve cotton sales on July 20. In the 7th week (August 31 to September 4), the floor price is set at 17,228 yuan per ton (based on standard grade 3128B). This floor price is not fixed; the actual floor price for each daily batch is determined by adjusting the standard grade price according to the cotton inspection results and the domestic cotton quality differential table published by the China Cotton Association. This means that within the same week, different batches may see significant price variations due to quality differences.
Notably, this marks the third consecutive weekly decline in the reserve cotton floor price. Market feedback indicates that early high-price ranges saw thin trading, with mills adopting a wait-and-see stance. The current price retreat is gradually activating essential restocking demand. However, it must be pointed out that the floor price is only a baseline; actual transaction prices may be higher due to competitive bidding, and a rush to purchase could erode the benefit of the lower floor price.
Industry Impact
For textile mills, the most immediate impact of the floor price reduction is lower raw material costs. Taking regular 32-count pure cotton yarn as an example, purchasing reserve cotton near the floor price could reduce raw material costs by several hundred yuan per ton of yarn compared to earlier highs, which is particularly critical for small and medium-sized mills with thin margins. However, whether this cost benefit translates into actual profits depends on downstream orders and yarn price trends. If end-user demand remains weak and yarn prices fall accordingly, the cost reduction may only benefit traders, not mills.
From an industrial cluster perspective, ginning factories and traders in major cotton-producing regions such as Xinjiang, Shandong, and Henan are closely monitoring the pace of reserve cotton transactions. The lower floor price may prompt some traders to accelerate inventory reduction, while mills prefer to procure in batches near the floor price to avoid heavy positions. This "wait-and-see" approach reflects market divergence on future cotton prices—some see a bottom, while others worry that ample global supply will continue to weigh on prices.
Furthermore, the reserve cotton floor price is highly correlated with the domestic-international price spread. Currently, international cotton prices are weakening due to production increase expectations in major producing countries, widening the spread and making imported cotton more cost-effective. Some export-oriented mills may shift to imported cotton, which could dilute the supporting effect of reserve sales on the domestic market and slow the pace of destocking.