According to China Cotton Network, last week saw the peak arrival of new cotton domestically, with market supply continuing to increase. The USDA raised its global cotton production forecast, while expectations for Fed rate cuts were again scaled back, leading to weak fluctuations in both domestic and international cotton prices.

I. Price Review

Domestically, new cotton processing reached its peak, with market supply continuing to expand. The abundant new crop exerted significant downward pressure on futures prices. Downstream spinning production remained relatively stable, providing some support for cotton consumption, while domestic cotton prices maintained a weak oscillation. This week, the Zhengzhou Cotton Futures main contract settled at an average price of 13,450 RMB /ton, down 71 yuan/ton (0.5%) from the previous week. The National Cotton Price Index B, representing inland standard-grade lint cotton market prices, averaged 14,739 RMB/ton, down 30 RMB /ton (0.2%) week-on-week.

Internationally, cotton prices trended lower amid factors including the USDA's upward revision of global production estimates, a dollar rebound driven by diminished expectations for a December Fed rate cut, and broader declines in commodity markets. This week, the settlement price for the main New York cotton futures contract averaged 63.96 cents per pound, down 0.96 cents per pound or 1.5% from the previous week. The International Cotton Index (M), representing the average landed cost at major Chinese ports for imported cotton, averaged 71.96 cents per pound. This translates to an import cost of RMB 12,398 per ton (calculated with a 1% tariff, excluding port charges and freight), down RMB 162 per ton or 1.3% from the previous week. Domestic cotton prices exceeded international prices by CNY 2,341/ton, with the price differential widening by CNY 133/ton compared to the previous week.

In the textile sector, domestic cotton yarn prices showed slightly stronger performance than imported yarn. The average market price for domestic C32S combed yarn was CNY 20,555/ton, up CNY 68/ton (0.3%) from the previous week. The average price of C32S combed yarn from major import sources was ¥20,834/ton, up ¥5/ton from the previous week, remaining largely unchanged. Conventional imported yarn was ¥303/ton higher than domestic yarn. Polyester staple fiber prices fell ¥20/ton to ¥6,283/ton.

II. Market Outlook

On the macro front, the probability of a Federal Reserve rate cut has diminished, while fluctuations in Sino-Japanese relations may adversely affect exports. Significant internal disagreement within the Fed regarding a December rate cut has led to a continuous weakening of market expectations for such a move. According to the Chicago Fed's rate-cut probability tool, the likelihood of a 25-basis-point cut in December has further declined to 32.7%. This reduced expectation has strengthened the U.S. dollar and increased pressure on commodity markets. Recent bilateral tensions between China and Japan have introduced uncertainties in trade cooperation. Japan has long been a key export market for China's textiles and apparel, accounting for approximately one-tenth of China's total exports in this sector. The current strain in Sino-Japanese relations may adversely affect bilateral economic exchanges, necessitating continued monitoring of bilateral developments. The State Council Executive Meeting outlined measures to boost consumption and stabilize investment, signaling intensified policy efforts to support year-end economic growth. At the November 14th State Council executive meeting, measures to boost consumption and stabilize investment were outlined, including enhancing the alignment between supply and demand for consumer goods and promoting consumption through multiple initiatives. The meeting emphasized leveraging consumption upgrades to drive industrial transformation, focusing on developing new products in key sectors and cultivating novel consumption scenarios and business models. Additionally, the market anticipates that growth-stabilizing policies may be further strengthened before year-end. Fiscal policy may be scaled up to boost consumption, while monetary policy is expected to implement reserve requirement ratio cuts and interest rate reductions to address challenges such as fluctuations in fourth-quarter economic indicators and slowing external demand.

In the cotton market, ample global supply persists as Brazil accelerates cotton exports. Favorable weather in U.S. cotton-producing regions has boosted output. According to the latest USDA data, this year's U.S. cotton production is projected at 3.07 million tons, a 6.81% upward revision from the September forecast. As of November 17, the U.S. cotton harvest progress reached 71%, down 5 percentage points year-on-year but up 1 percentage point compared to the five-year average for the same period. Brazil's Secretariat of Foreign Trade forecasts production at 4.11 million tons, an 11.1% year-on-year increase. Exports continue to grow strongly, with daily shipments averaging 24,000 tons—significantly higher than the 16,000 tons recorded during the same period last year. Domestically, cotton quality indicators have improved, and market sales remain stable. As cotton processing enters its later stages, lint quality has shown gains compared to earlier periods. Enterprises report reduced levels of light and dirty cotton, along with improved micronaire values. Companies are now accelerating lint sales. According to the National Cotton Market Monitoring System, as of November 20, the national processing rate for new cotton reached 64.2%, up 4.3 percentage points year-on-year; the sales rate stood at 27.9%, an increase of 17.3 percentage points year-on-year. Data from the China Fiber Quality Monitoring Center shows that the cumulative volume of cotton inspected nationwide during the same period reached 3.423 million tons, an 18% increase year-on-year. Currently, textile enterprises are facing sluggish order volumes coupled with ample cotton supply in the market.

As an integrated internet platform providing benchmark prices, on November 24, the benchmark price of cotton lint from SunSirs was 14,798.83RMB/ton, a decrease of 0.4% compared with the beginning of the month (14,858.50 RMB/ton).

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