Price trend

Cotton prices generally fluctuated within a narrow range in August. As the cotton season draws to a close, the short-term tightening of domestic market supply, driven by the expected bumper harvest and early arrival of new cotton, has been countered by a potential rebound in production and sales in the downstream textile market. As September approaching, overall production and sales in the downstream textile market were improving, but price increases remained difficult, and confidence in the peak season was somewhat waning. According to the SunSirs Commodity Market Analysis System, as of August 28, the spot price of 3128B grade lint cotton was 15,331 RMB/ton, up 0.41% from the beginning of the month.

Analysis review

Futures: The Zhengzhou cotton futures market showed an overall volatile upward trend this month, with the cotton sales basis remaining stable. Spot trading activity was subdued due to textile companies' "buy as they use" purchasing strategy. The recent firmness in cotton futures prices further dampened demand for bulk spot purchases, leading to subdued market activity. As of August 28, the settlement price of the Zhengzhou cotton main contract was 14,070 RMB/ton, up 3.34% from the beginning of the month. US cotton prices initially rose before declining, with the settlement price of the main contract at 66.68 US cents/lb on August 27, up 0.5% from 66.36 at the beginning of the month.

Macro side:

The increase in tariff import quotas had finally come to fruition. The National Development and Reform Commission (NDRC) issued the "Announcement on Applications for Preferential Tariff Rate Processing Trade Import Quotas Outside the 2025 Cotton Tariff Quota." The quota is 200,000 tons, 100% of which is for processing trade. The "textile-only" market remains in place, essentially excluding cotton trading companies and non-export-oriented textile enterprises. This was largely in line with market expectations, and the market performance had been largely unaffected by the additional tariff quotas.

On August 12, China and the United States simultaneously announced a 90-day extension of the tariff suspension period, maintaining the tariff rates imposed by both sides (25% for Chinese cotton imports and 30% for US textile and apparel imports from China). The easing of external market risks had created more stable expectations for textile exports, potentially ushering in a recovery in orders and easing cost pressures.

Supply:

National commercial cotton inventories were declining. As of August 22, 2025, total commercial cotton inventories reached 1.7126 million tons, a year-on-year decrease of approximately 20%. Regarding new cotton, temperatures in Xinjiang's cotton-growing areas were favorable, with effective accumulated temperatures at historically high levels for the same period, providing excellent basic conditions for cotton growth. As of August 28, most new cotton in Xinjiang had entered the boll-breaking stage, while parts of eastern Xinjiang had entered the boll-opening stage. With favorable temperatures in producing areas, a small amount of new cotton is expected to enter the market early in October. The short-term tightening of supply is a key driver of cotton prices. However, due to the expected bumper harvest and early market launch, cotton prices remained range-bound, with no signs of a breakthrough.

Import: In July 2025, China's cotton imports were 50,000 tons, an increase of 20,000 tons from the previous month, an increase of 66.7%; a decrease of 150,000 tons from the previous year, a decrease of 73.2%. From January to July 2025, China's cumulative cotton imports were 520,000 tons, a decrease of 74.2% from the previous year. Although cotton imports increased in July, the overall volume was not large.

Demand:

Textile companies generally expect the traditional peak season of September and October to boost demand. Overall downstream sales are expected to continue to improve, with machine utilization rates increasing month-over-month but still lower than the same period last year. Cotton yarn sales improved slightly, with prices also increasing slightly. However, due to the relatively small adjustments, the losses faced by most mainland companies remained unchanged. The cotton fabric market was in the off-season, with slow production and sales and no significant improvement in demand. Textile companies were actively reducing prices and destocking. It is expected that the market may see some improvement after mid-September, potentially reaching a turning point.

Exports: Textile and apparel export data came under pressure in July. Textile and apparel exports reached $26.77 billion in July, down 0.1% year-on-year and 2% month-on-month. Textile exports reached $11.6 billion, up 0.6% and down 3.7% month-on-month, while apparel exports reached $15.16 billion, down 0.5% and down 0.7% month-on-month, representing a 13 percentage point drop in month-on-month growth compared to June.

Internationally:

India announced a complete exemption of cotton import tariffs and agricultural surcharges from August 19th to September 30th. Later, Federal Reserve Chairman Jerome Powell stated at the Jackson Hole Global Central Bank Annual Meeting that the Fed may cut interest rates in September. These two positive factors provided short-term support for cotton prices. However, high tariffs imposed by the United States have dampened domestic demand for textiles and apparel. Amidst the tensions between tightening supply and pressured demand, international cotton prices remained range-bound.

The USDA's monthly report significantly lowered both U.S. and global cotton production. The report shows that U.S. cotton planting area is expected to be 9.28 million acres in 2025/26, down 8.3% from the July estimate of 10.12 million acres. Production was lowered by 303,000 tons from the previous month to 2.876 million tons, down 50,000 tons year-on-year. Ending stocks were also lowered by 218,000 tons. Global cotton production was lowered by 392,000 tons, global consumption was lowered by 28,000 tons, and ending stocks for 2025/26 were also lowered by 743,000 tons.

USDA Global Production, Sales, and Inventory Forecast for August (Unit: 10,000 tons)

Market outlook

At the transition point between old and new cotton, domestic cotton prices were supported by a short-term tightening of market supply and expectations of a peak season. However, overall, the expected bumper harvest and early market launch of new cotton were suppressing market growth. Cotton prices are expected to be volatile and stronger in the short term, but price increases will be difficult. Further attention needs to be paid to the growth of new cotton and the actual performance of demand during the peak season.

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