According to Sina Finance, the 2025/26 cotton market will be characterized by “undervalued operations and a tight supply-demand balance.” With global production projected to increase and end-user consumption diverging, domestic prices are likely to fluctuate within a narrow range due to factors including import policy constraints, production growth expectations, and export support. Policy adjustments and inventory structure will emerge as key variables.
From a global supply-demand perspective, the USDA's November report raised the 2025/26 global cotton production forecast by 523,000 metric tons. Output projections for China, the United States, and Brazil were all revised upward, driving a 607,000-metric-ton increase in global ending stocks—an overall bearish impact. By country: Brazil's output was revised up by 108,000 tons, with exports rebounding by 44,000 tons and ending stocks rising slightly; China's production was revised up by 220,000 tons to 7.29 million tons. Field surveys suggest actual output may reach 7.5 million tons, but with import policies remaining restrictive, the tight annual supply-demand balance persists.
In the domestic market, spot trading maintains a pace driven by essential demand, with basis differentials remaining elevated year-on-year and trending steadily. New-crop procurement has concluded, and pre-holiday price declines curbed irrational rush buying. Planting costs provide strong psychological support, while elevated basis differentials preemptively reflect the tight annual supply-demand balance—a pattern highly similar to the 2024/25 season. Policy developments warrant attention: the 2025/26 season marks the final year of the 18,600 RMB/ton target price subsidy, with potential policy adjustments looming for the following year. Additionally, the reduction in inland premiums/discounts for the 2026/27 season may eliminate arbitrage opportunities for warehouse receipt delivery.
The consumption side exhibits a divergence of “strong exports, weak domestic sales.” Total cotton textile consumption in 2024/25 increased marginally by 0.68% year-on-year, with exports surging 24.25% while domestic sales declined 35.7%. Cumulative exports of cotton textiles from January to October 2025 grew 9.53% year-on-year, with positive growth achieved in traditional markets like the US, EU, and ASEAN. Simultaneously, significant expansion was seen in emerging markets such as Africa, Russia, and Latin America. Behind this export growth, the logic of declining unit prices and market diversification became prominent, with reduced manufacturing costs supporting export competitiveness. Regarding domestic sales, although affected by declining disposable income and weak consumer confidence, the low unemployment rate and flexible savings rate suggest limited room for further contraction in 2026, with potential for marginal improvement.
Inventory and profit performance diverged across the supply chain. Spinning mills staged temporary restocking of raw materials, while finished cotton yarn inventories saw slight accumulation. Weaving mills reduced raw material inventories, with grey fabric inventories slightly accumulating, and rigid sales showing some improvement. As of November 21, spinning mills held 30 days of raw material inventory and 28.4 days of finished goods inventory. Weaving mills maintained only 7 days of cotton yarn inventory and 31.7 days of greige fabric inventory, with overall inventory levels remaining manageable. Profit-wise, mainland spinning enterprises recorded theoretical cash flow of approximately ¥260/ton, while Xinjiang spinning enterprises achieved theoretical profits of about ¥660/ton, indicating a slight recovery in cotton yarn margins. Imported cotton yarn profits have emerged as spot import margins have widened following declines in the US dollar-denominated cotton market. However, extended shipment cycles pose challenges to realizing these profits.
On the macro and international front, the Federal Reserve's Beige Book indicates near-stagnation in the US economy. Yet, the rising probability of a December rate cut coupled with the suspension of balance sheet reduction may alleviate liquidity concerns. Regarding import patterns, total domestic cotton imports for the 2024/25 season remained low. With policies expected to continue into the 2025/26 season, the import scale—894,000 tons under quotas plus 200,000–400,000 tons under processing trade—will have limited impact on the tight supply-demand balance. For domestic-international price differentials, narrow fluctuations are likely under the tight domestic supply-demand conditions, potentially evolving into a reverse arbitrage pattern between domestic and international markets.
Looking ahead to 2026, increased global production will exert bearish pressure. However, domestic import constraints and marginal consumption improvement will support the tight supply-demand balance, keeping the market operating at low valuations overall. Key focus areas include the implementation of policy adjustments, overseas capacity releases, and the sustainability of end-user consumption. No clear unilateral drivers are expected in the short term, while medium-to-long-term attention should be paid to planting intentions and the evolution of supply-demand contradictions.
As an integrated internet platform providing benchmark prices, on December 1st, the benchmark price of cotton lint from SunSirs was 14,885.50 RMB/ton, an increase of 0.18% compared to the beginning of the previous month (14,858.50 RMB/ton).
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