Reserve Cotton Price Drops Again: How Textile Mills Should Time Their Purchases

The base price for reserve cotton sales fell to 17,228 yuan per ton for the week of Aug 31 to Sep 4, down from 17,300 yuan the previous week. This seemingly small change sends a clear signal: policy is shifting from supporting prices to stabilizing supply, and textile mills should adjust their procurement strategies accordingly.

Background

The China National Cotton Reserve Corporation started selling 2026 reserve cotton on July 20, announcing a base price every week. The seventh week's price of 17,228 yuan per ton (for standard grade 3128B) is calculated based on national regulations and the quality differential table published by the China Cotton Association. Actual batch prices are adjusted daily according to inspection results, meaning final transaction prices can vary around the base.

Notably, the base price has been declining for several consecutive weeks, from 17,650 yuan in the first week of July to 17,228 yuan now, a cumulative drop of over 2%. This stepwise reduction reflects policy concerns about overheated cotton prices, which have squeezed profits for downstream textile mills.

Industry Impact

The lower base price directly reduces raw material costs for textile mills. With each ton of cotton about 400 yuan cheaper, a medium-sized mill using 1,000 tons per month could save hundreds of thousands of yuan monthly. This is a timely relief for companies entering the seasonal transition period.

However, lower costs do not automatically mean higher profits. Falling cotton prices often push yarn quotes down, and downstream fabric and garment buyers may demand price cuts, limiting actual margin improvement. Moreover, the quality composition of reserve cotton matters—if high-grade cotton is scarce, mills still need to purchase from the spot market, so overall costs may not drop significantly.

For export-oriented companies, the lower base price has another implication: reduced cost in RMB terms could enhance price competitiveness abroad. But currency fluctuations and weak overseas demand remain major uncertainties, so companies should not equate cost relief with order growth.

Practical Advice

For Procurement Teams - Monitor weekly base price changes and increase purchase volumes during low-price windows, but avoid overstocking to preserve cash flow. - Use the quality differential table to select cost-effective batches, especially grades that match your spinning requirements. - Stay in close contact with the reserve sales platform to get daily batch information and adjust bidding strategies flexibly.

For Foreign Trade Companies - Consider including cotton price fluctuation clauses in export contracts to mitigate raw material cost risks. - Use the current cost window to offer competitive prices to win new orders, but carefully assess exchange rate risks to avoid profit erosion. - Monitor the spread between domestic reserve cotton and international cotton prices; if the gap widens, evaluate the potential of importing cotton as an alternative.