Price trend

Last week, domestic cotton prices rose initially before falling. On Thursday, Zhengzhou cotton futures reached a high of 15,095 RMB/ton, a new high in a year and a half, but also encountered strong resistance at the 15,000 RMB/ton mark. Futures prices then corrected downwards, and spot cotton prices followed suit. According to SunSirs' commodity market analysis system, as of January 12th, the spot price of 3128B grade lint cotton was 15,855 RMB/ton, a 1.62% increase compared to the previous Monday.

The main reasons for this price increase are:

1. New policies for the upcoming year are expected to lead to a significant reduction in the planted area in Xinjiang; a new cycle of target price subsidies will provide a safety net.

2. The central bank held its 2026 work conference, clarifying that it will continue to implement a moderately loose monetary policy in 2026, flexibly and efficiently utilizing various monetary policy tools such as reserve requirement reductions and interest rate cuts; and strengthen financial support for key areas such as expanding domestic demand, technological innovation, and small and medium-sized enterprises. Amid strong market expectations, cotton prices, along with other commodities, generally surged.

After cotton prices broke through the 15,000 mark, downstream textile companies faced increased cost pressure, leading to a significant delay in their willingness to replenish stocks. Simultaneously, no further news regarding reductions in planting area emerged from relevant meetings held in Xinjiang, causing market sentiment to decline and cotton prices to begin consolidating and correcting. Due to the recent sharp rise in cotton prices, textile companies' profits have been continuously squeezed, resulting in a delay in their willingness to restock and a continued decline in raw material inventories. As of the week ending January 8th, the average inventory of cotton held by textile companies in major regions was equivalent to 24.59 days of supply, a decrease of 0.49 days compared to the previous week.

Last week, the U.S. cotton market showed a similar trend, with prices rising continuously at the beginning of the week. However, due to continued weak performance in U.S. cotton sales, with upland cotton sales decreasing by nearly 30% in the latest week, and other negative macroeconomic factors, prices fell back. Nevertheless, the overall price level of U.S. cotton remained higher last week. The average settlement price of the ICE cotton futures main contract was 64.69 cents per pound, a slight increase of 0.45 cents per pound compared to the previous week, representing a 0.7% increase.

Market Outlook 

Although expectations of reduced cotton planting and production in Xinjiang continue, no further news has emerged. Following the rise in cotton prices, increased caution in the downstream market and year-end payment pressures are making it more difficult for cotton yarn prices to follow suit. Cotton prices may continue to adjust downwards, but the extent of the decline will likely be limited.

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