Although the short-term rise in cotton prices may trigger a phase of adjustment, the overall adjustment space is limited, and the market is expected to fluctuate upwards in the future.

Since the U.S. Department of Agriculture (USDA) released the November supply and demand report, the domestic cotton futures price has gradually fluctuated upwards; although the ICE cotton futures price has been fluctuating at a low level, its impact on the domestic market is limited. If the foreign cotton price stabilizes and recovers later, the price difference between domestic and foreign cotton is expected to narrow, and combined with the expectation of a recovery in foreign trade orders next year, the domestic cotton price is expected to continue the fluctuating upward trend.

In the November cotton supply and demand report from the US Department of Agriculture (USDA), the cotton production in the United States, China, and Brazil has been revised upward, but the cotton consumption in the three countries has remained at the previous forecast level, resulting in a significant increase in the global cotton ending stock and a synchronous recovery in the stock-to-use ratio.

Looking at the cotton production data of the three countries, the cotton production still reached 14.12 million bales in the 2025/2026 marketing year, basically the same as the 14.19 million bales in the same period of the previous year, against the backdrop of a 10% reduction in cotton planting area in the United States; Brazil's cotton production recorded a historical high of 18.75 million bales. In terms of China, the cotton production of 7.294 million tons predicted in the November report has approached the 7.409 million tons predicted by the National Cotton Market Monitoring System and exceeded the 7.278 million tons predicted by the China Cotton Association.

Overall, the room for the USDA to continue adjusting upward the global cotton production in its December supply and demand report is relatively limited. With the expectation of a easing of geopolitical tensions, the report is likely to increase cotton consumption, and the overall data is expected to be on the high side.

From the historical trend of ICE cotton futures, the price of the March contract is less than 65 cents per pound, down 8.5% from 71 cents per pound last year at this time, and the absolute price is at the low point in the past 5 years. Domestically, the current cotton futures price has also fallen more than 2% from the level of about 14,000 RMB per ton last year at this time, and the basis is basically the same as last year, and the absolute price is also at the low point in the past 3 years.

Against the backdrop of low prices, cotton spinning enterprises are actively restocking. According to the National Cotton Market Monitoring System, as of November 27, the national cotton sales progress reached 33.2%, an increase of 18.9 percentage points compared to the same period last year, and 22.1 percentage points higher than the four-year average. Additionally, according to the Cotton Textile Information Network, as of November 28, the cotton inventory days of spinning enterprises reached 30.6 days, a new high in the past four years; the national cotton industrial inventory in November was 931,400 tons, a slight increase from the 925,200 tons in the same period last year. It is expected that the industrial inventory will continue the seasonal accumulation trend in December, which will effectively boost cotton demand.

China's textile and apparel market has shown strong resilience. Specifically, the retail sales of online wearable goods increased by 2.8% in the first three quarters of 2025, up by 1.4 percentage points compared to the first half of the year; from January to October 2025, the retail sales of clothing, shoes, and caps, as well as needle textiles, increased by 4.1% year-on-year, with the retail sales of clothing alone reaching 107.1 billion RMB in October, up by 6.3% year-on-year. With the traditional sales season of domestic clothing in November and December, the retail sales of textiles and apparel are expected to exceed 6% year-on-year.

On the export front, the General Administration of Customs latest data show that in October 2025, the total export value of China's textiles and apparel, measured in US dollars, was $22.26 billion, a year-on-year decrease of 12.6% and a month-on-month decrease of 8.8%; for the first 10 months of the year, the cumulative export value was $243.94 billion, a slight year-on-year decrease of 1.6%. However, with the improvement in the policy environment and the United States reducing tariffs on some Chinese goods by 10% starting in November, the average tariff rate for China's textiles exported to the US will drop to the range of 27.5% to 45%, and the gap with the average tax rate of 20% for Southeast Asian countries' textiles exported to the US has narrowed significantly. Against this backdrop, it is expected that China's textile and apparel exports to the US will gradually increase in the later period, and the export data for November and December is expected to see a marginal improvement.

Although the cotton market has gradually entered the off-season for consumption, the operating load of downstream spinning enterprises has not significantly declined. As of November 28, the daily average startup rate of pure cotton yarn factories was 48%, and the daily average startup rate of full cotton gray cloth was 49.5%, both of which were the same as last week. It is expected that the startup rate of the cotton spinning industry will only decrease significantly in the two weeks before the Spring Festival. It is worth noting that unlike the continuous restocking of raw materials in the cotton spinning process, weaving enterprises have been in a stage of reducing cotton yarn inventory since October. Currently, the number of days the cotton yarn raw material inventory can be used is only 6.8 days, which is the second lowest point of the year and there is a clear demand for restocking later.

Overall, the cotton price has strengthened with dual driving factors from both domestic and foreign aspects. On the foreign front, the market widely expects the Fed to start cutting interest rates in December, and the weakness of the US dollar index supports the recent stabilization and recovery of ICE cotton, which in turn drives the Zhengzhou cotton to rise synchronously. On the domestic front, the market has a strong expectation that overseas orders will return next year, and the accelerated progress of domestic cotton spot sales further constitutes the core support for the price to rise. Although the rapid increase in short-term cotton prices may trigger a stage adjustment, the overall adjustment space is limited, and the market is expected to rise fluctuatingly and challenge the 14,500 RMB/ton level.

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