Trend Watch
As the AW 2026 season approaches, the global cotton market is navigating a complex rebalancing. According to the International Cotton Advisory Committee (ICAC), world cotton production for 2025/26 is projected to decline slightly to 25.2 million tons, while consumption is expected to remain around 24.5 million tons due to sluggish textile demand. This narrowing surplus suggests that cotton prices are unlikely to experience a sustained rally, instead trading in a broad range with increased volatility.
In China, Xinjiang cotton continues to solidify its dominant role. Output in 2025 reached approximately 5.2 million tons, accounting for over 90% of national production. Supported by the target price subsidy policy and advancements in cultivation techniques, Xinjiang cotton has narrowed the quality gap with international benchmarks in key metrics like fiber length and strength. However, weak downstream demand and high inventory levels among textile mills have kept spot prices within a narrow band of RMB 15,000-16,000 per ton, with limited upside momentum.
Import quota policy emerges as a pivotal factor influencing market direction. In 2026, the National Development and Reform Commission has already allocated 894,000 tons of low-duty (1%) quotas, while additional tranches under the sliding-scale duty regime remain tightly controlled. Industry insiders anticipate that if the domestic-import price spread widens beyond RMB 1,500 per ton, authorities may release supplementary quotas to stabilize domestic prices, exerting temporary pressure on Xinjiang cotton. Conversely, if quotas fall short of expectations, the price gap could narrow, diminishing the appeal of imported cotton.
Industry Impact
Cotton price movements and quota policies directly reshape the profit landscape across the textile value chain. For textile mills, raw material costs account for 60%-70% of total expenses; a RMB 1,000 per ton fluctuation in cotton prices can impact gross margins by 2-3 percentage points. In an environment of weak final demand and limited pricing power, cost control becomes a matter of survival. Consequently, during the AW 2026 procurement season, mills must adopt refined inventory management strategies to avoid costly overstocking.
The Xinjiang cotton industry faces a dual challenge of policy support and market competition. On one hand, the target price subsidy ensures farmer incomes and stabilizes planting area. On the other, narrowing internal-external price spreads reduce the advantage of imported cotton, prompting some mills to switch to competitively priced Xinjiang cotton, which aids in destocking domestic inventories. However, if quotas are expanded significantly, Xinjiang cotton’s competitive edge could weaken, leading to price declines.
From a global perspective, bumper harvests in major producers like India and Brazil (with Brazil’s 2025/26 output estimated at 3.7 million tons) intensify international competition. Southeast Asian countries (Vietnam, Bangladesh) continue to expand yarn capacity leveraging low labor costs, posing substitution pressure on Chinese yarn exports. This competitive landscape compels Chinese textile enterprises to enhance competitiveness through product upgrades and operational efficiency, rather than relying solely on raw material price advantages.
Practical Recommendations
For Procurement Managers - Develop a dynamic inventory model with trigger points based on the expected price range (RMB 15,000-16,000/ton) to avoid chasing highs or selling lows. - Monitor quota release timing; if the internal-external price spread exceeds RMB 1,200/ton, consider increasing imported cotton purchases to lock in cost advantages. - Forge long-term contracts with Xinjiang cotton suppliers to secure prices, and actively participate in reserve cotton auctions to source low-cost inventory.
For Designers and Product Developers - Prioritize high-count yarns (60s and above) made from Xinjiang cotton, which now match imported long-staple quality with stable supply, ideal for premium collections. - To mitigate price volatility, explore blends (e.g., cotton/regenerated cellulose, cotton/polyester) that balance cost and hand feel, reducing dependence on pure cotton. - Develop differentiated products such as organic or recycled cotton certified lines, leveraging eco-premiums to offset raw material cost pressures.
For Factory Operations - Optimize cotton blending processes by mixing Xinjiang and imported cottons (e.g., US, Brazilian) to maintain yarn quality while lowering overall costs. - Enhance production efficiency and yarn realization rates to minimize waste, using lean management to hedge against price fluctuations. - Closely track Zhengzhou Cotton Futures and utilize hedging tools to lock in costs for forward orders, mitigating risk from sharp price swings.
For Foreign Trade and Brands - Emphasize sustainability aspects of Xinjiang cotton (e.g., water-saving irrigation, mechanical harvesting) to align with global supply chain traceability trends, commanding premium pricing. - Introduce dynamic pricing mechanisms in quotes, with clauses linking to cotton price indices to share risk with clients. - Explore emerging markets (e.g., Middle East, Africa) to diversify reliance on traditional Western markets, leveraging RMB settlement advantages to reduce currency risk.
In AW 2026, the cotton market is set to be a stage of intertwined opportunities and challenges. Prices will slowly find their bottom amid policy and supply-demand dynamics, while the delicate balance between Xinjiang cotton and import quotas will be the core variable in strategic decision-making for textile enterprises. Only through precise forecasting and flexible adaptation can stakeholders seize the initiative in the upcoming reshuffle.