Price trend

Driven by strong policy expectations of a reduction in planting area, domestic cotton prices experienced a significant increase over the past two months. Prices in January reached a cyclical high, the highest level in nearly a year and a half. According to SunSirs' commodity price analysis system, as of January 30th, the spot price of 3128B grade lint cotton was 16,197 RMB/ton, a 4.16% increase compared to the beginning of the month. In the futures market, as of January 30th, the settlement price of the Zhengzhou cotton main contract was 14,770 RMB/ton, a 0.48% increase compared to the beginning of the month.

Analysis of the core drivers of price increases

The recent rise in cotton futures prices was the result of a confluence of multiple factors, including supply and demand, costs, and market expectations. Simultaneously, other factors, such as market expectations of a reduction in planting area next year, had also strengthened the market's bullish sentiment for the future.

Strong policy expectations: The policy expectation of reducing cotton planting area in Xinjiang in 2026 is the core driving force behind this market trend. According to Xinjiang cotton enterprises and relevant departments, the target planting area for Xinjiang cotton in the 2026/27 season has been clearly set at 36 million mu, a significant reduction of 5-7 million mu compared to the actual scale in 2025, representing a reduction of over 10%. This is the largest adjustment to Xinjiang's cotton planting scale in recent years.

Downstream pre-holiday restocking demand: Although terminal consumption is recovering slowly, as the Spring Festival approaching, some textile enterprises still have a certain level of essential restocking demand, which is providing a temporary boost to cotton prices. According to data from the National Cotton Market Monitoring System, as of January 22, 2026, the national new cotton sales rate was 62.7%, a year-on-year increase of 24.1 percentage points, and 28.2 percentage points higher than the average of the past four years.

Factors limiting the upward movement of cotton prices:

Ample supply: As cotton processing in Xinjiang nears completion, supply-side pressures are gradually becoming more apparent. As of January 29th, the certified inspection volume of cotton nationwide for the 2025 season was 7.2298 million tons.

Widening price gap between domestic and international cotton: The sharp increase in domestic cotton prices has widened the price gap between domestic and international markets to a historical high (approximately 3,200 RMB/ton), making imported cotton yarn extremely price-competitive and severely suppressing demand for domestically produced cotton.

Supply Chain Transmission Obstacles: The cotton market has recently shown a divergent pattern of "upstream strength, downstream weakness." Although cotton prices were trending upwards, downstream demand remained weak, making it difficult to smoothly pass on high raw material costs to the yarn and fabric stages. As the Spring Festival approaches, coastal garment, dyeing, and weaving enterprises are gradually reducing production and taking holidays. Yarn and fabric procurement has weakened since late January, dampening cotton mills' willingness to replenish raw material stocks.

Weak downstream demand: As of January 30, the operating rate of spinning mills remained generally stable, with textile companies mainly fulfilling existing orders. New order volumes have decreased, logistics capacity has been reduced, and downstream inventory replenishment has contracted, leading to an overall weakening of the market. Although spinning mill profit margins were still under pressure, yarn inventory levels are not yet significantly high and have not yet created significant negative feedback pressure on upstream suppliers.

International cotton prices are fluctuating within a range

The January ICE cotton futures contract has shown a clear range-bound trading pattern, constrained by macroeconomic sentiment and downstream demand, with significant resistance at higher levels. Since January, ICE cotton futures have fluctuated between 63 and 65 cents, and with no significant recovery in demand, cotton prices are expected to maintain a volatile, bottom-building pattern.

According to the U.S. Department of Agriculture's January cotton supply and demand report, global production was revised down by 76,200 tons. Consumption was revised up by 65,300 tons, and global ending stocks for the 2025/26 season were revised down by 326,600 tons. The most significant change in this report is the downward revision of global production, marking a turning point in the global supply expansion cycle. This provides strong support for the market, but the slow recovery on the demand side, mainly due to an upward revision of 109,000 tons in China's consumption estimate, means that global end-use textile consumption remains weak, limiting the upside potential for cotton prices.

Summary and Outlook:

The reality of ample supply is in conflict with changing downstream demand. The expected adjustment cycle in planting area in 2026 provides some support, but as the Lunar New Year approaching, downstream restocking demand is slowing down. After reaching a new high for the period, cotton prices may enter a period of fluctuation before the New Year. Attention should be paid to when the specific details of policies such as the reduction in Xinjiang's planting area are clarified and implemented, as well as the actual order and profit recovery situation of the downstream textile industry after the New Year.

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