Following the Spring Festival holiday, domestic cotton prices opened strongly, with the main contract breaking through the key 15,000 yuan/ton threshold. This surge was driven by stronger U.S. cotton prices and expectations of tighter domestic supply. On one hand, downward revisions to U.S. cotton planting intentions and improving export sales data, coupled with expectations of tightening domestic inventories, provided support for price gains. On the other hand, after the sharp rally, the market experienced a pullback from its highs, indicating some near-term adjustment pressure.

New-Crop Cotton Production Expected to Decline

Globally, new-crop cotton production is projected to decrease. In the U.S., the National Cotton Council's (NCC) 45th Annual Early Season Planting Intentions Survey indicates American cotton farmers plan to plant 9 million acres this spring, down 3.2% from 2025. Of this, upland cotton planting intentions stand at 8.8 million acres, a 3.4% year-on-year decline. Amid expectations of a significant increase in soybean acreage, persistently rising cotton production costs, and diminished price competitiveness relative to other crops—compounded by the anticipated 2026 La Niña phenomenon—the probability of further reductions in U.S. cotton planting area has increased.

In Brazil, the Brazilian Cotton Producers Association (ABRAPA) forecasts that the 2025/2026 cotton planting area will decline by 5.5% year-on-year to 2.052 million hectares. Yields are projected to decrease by 4.7% to 1,866 kilograms per hectare. Based on these figures, Brazil's lint cotton output for the current year is estimated at 3.829 million metric tons, a 9.9% decline from the previous year. Brazil's Institute of Geography and Statistics (IBGE) forecasts 2026 cotton acreage at 2.010513 million hectares, a 6.2% decrease from the previous year.

Additionally, the 102nd USDA Agricultural Outlook Forum held in February 2026 presented core forecasts for the 2026/2027 cotton supply and demand: global cotton production is projected at 25.26 million tons, a 3.2% year-on-year decrease; Global consumption is projected at 26.15 million tons, a 1.2% increase year-on-year;

Global ending stocks for the new marketing year are forecast at 15.50 million tons, a 5.2% decrease year-on-year, with the stock-to-use ratio declining by approximately 4 percentage points year-on-year.

Overall, tight global cotton supply is expected to provide solid support for cotton prices.

Domestic Cotton Market Supported by Firm Supply-Demand Dynamics

Recently, significant adjustments have been made to China's export tariffs on textiles and apparel to the United States. On February 20, 2026, the U.S. Supreme Court overturned the Trump administration's tariffs imposed under the International Emergency Economic Powers Act (IEEPA) by a 6-3 ruling. Consequently, the U.S. reduced nominal tariffs on all countries, lowering the weighted average tariff rate for Asia from 20% to 17% and for China from 32% to 24%.

On February 24, 2026, the Trump administration shifted to imposing a 15% temporary tariff on all imported goods for 150 days under Section 122 of the Trade Act of 1974. These temporary tariffs exempted key minerals, natural resources, agricultural products, pharmaceuticals, electronics, automobiles, aerospace products, and goods covered under the USMCA agreement. They also did not stack with Section 232 tariffs. Even with the implementation of these Section 122 temporary tariffs, the overall tariff rate on Chinese exports to the U.S. has significantly decreased compared to previous levels. Among the additional tariffs imposed by the U.S. since 2025, only the 10% temporary tariff under Section 122 remains in effect.

Overall, the composite tariff rate for Chinese textile and apparel exports to the U.S. now ranges between 17.5% and 35%, representing a reduction of approximately 10 percentage points. This development is conducive to a steady recovery in cotton consumption demand, with textile exports expected to rebound.

In the domestic market, commercial cotton inventories in China increased by only 10,000 metric tons year-on-year as of January 2026. Despite a significant increase in cotton production during the 2025/2026 season, this inventory growth rate has narrowed considerably compared to the same period last year. Demand resilience is evident: Xinjiang textile enterprises continue to expand production, driving rigid cotton demand. Following the Spring Festival holiday, the market anticipates the traditional peak season of “Golden March and Silver April.” Downstream enterprises are gradually resuming operations, and overall pre-holiday order intake was relatively robust, indicating strong industry confidence in the post-holiday market. However, it is worth noting that with the substantial phase-specific rise in Zhengzhou cotton prices, the price differential between domestic and international cotton remains elevated, potentially subjecting domestic cotton prices to temporary pressure.

Overall, the tight global cotton supply-demand balance and robust domestic fundamentals jointly form the core support for this round of cotton price increases. Globally, both the planting area and production of cotton in the new crop year for the United States and Brazil are expected to decline. The global cotton inventory-to-consumption ratio is falling, coupled with a significant rebound in U.S. cotton export contracts, leading to a stronger trend in foreign cotton prices. On the macro front, adjustments to U.S. tariff policies have reduced tariffs on Chinese textile exports to the United States, fueling expectations of a recovery in exports.

Domestic market outlook: By January 2026, commercial cotton inventories in China had increased by merely 10,000 tonnes year-on-year. Despite a significant rise in cotton output during the 2025/2026 season, this inventory growth rate has markedly narrowed compared to the same period last year. Demand resilience is evident: Xinjiang textile enterprises continue to expand production, driving up inelastic demand for cotton. Following the Spring Festival holiday, the market anticipates the traditional peak season of ‘Golden March and Silver April’. Downstream enterprises are gradually resuming operations, and overall pre-holiday order intake was relatively robust, indicating strong industry confidence in the post-holiday market. However, it should be noted that with Zhengzhou cotton prices experiencing a substantial phase-specific surge, the price differential between domestic and international cotton remains elevated, potentially subjecting domestic cotton prices to temporary pressure.

Overall, the tight global cotton supply-demand balance and robust domestic fundamentals jointly form the core support for the current cotton price rally. Globally, both the US and Brazil face downward revisions in projected new-crop cotton planting areas and yields, leading to a decline in the global cotton stock-to-use ratio. This, coupled with a significant rebound in US cotton export contracts, has bolstered the strength of international cotton prices. Macroeconomically, adjustments to US tariff policies have reduced tariffs on Chinese textile exports to the US, fuelling expectations of a recovery in exports.

Domestically, commercial cotton inventories have seen limited growth. Expectations of reduced planting areas in Xinjiang further reinforce the supply contraction narrative, while the target price subsidy policy provides a floor for cotton prices. Downstream enterprises are resuming operations at a favourable pace, with strong expectations for the traditional peak season indicating robust demand resilience. Overall, bullish factors currently outweigh bearish ones in the cotton market, suggesting that cotton prices are likely to maintain a firm trajectory in the medium to long term. Key areas for continued monitoring include the actual implementation of global cotton planting, the latest developments in US tariff policies, and the extent to which downstream peak-season demand materialises.

As an integrated internet platform providing benchmark prices, on March 4, the SunSirs cotton benchmark price was 16,594.67RMB/ton, a decrease of 0.27% compared with the beginning of the month (16,640.00 RMB /ton)..

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