Following the May Day holiday, cotton prices experienced a period of significant volatility, marked by both sharp surges and steep declines. Driven by trends in international markets, Zhengzhou cotton futures surged to a high of 16,955 RMB/ton; however, the market subsequently entered a phase of volatile correction, culminating in a sharp drop of 400 points on the 8th—effectively erasing the gains accumulated in the preceding rally. The primary catalyst behind this latest market correction was speculation regarding the release of state cotton reserves. Widespread rumors circulating in the market that "state cotton reserves are imminent" have fostered a pervasive wait-and-see sentiment among downstream textile enterprises; apprehensive that cotton prices might plummet once the reserves are released, these firms have exhibited a marked reluctance to make new purchases.
According to data from the SunSirs Commodity Market Analysis System, as of May 11, the domestic spot price for Grade 3128B lint cotton stood at 17,948 RMB/ton, an increase of 0.82% compared to pre-holiday levels.
Domestic Market:
Accelerated Sales of New-Crop Cotton: According to survey data from the National Cotton Market Monitoring System, as of May 7, 2026, the national processing rate stood at 99.9%, remaining unchanged year-on-year. The national sales rate reached 91.6%, representing a year-on-year increase of 14.6 percentage points and an increase of 19.7 percentage points compared to the average of the past four years.
Demand Entered the Off-Season: The textile industry is entering its traditional seasonal lull. Sharply rising cotton prices are squeezing corporate profit margins, and downstream sectors have shown limited willingness to accept recent yarn price hikes; consequently, fabric mills are currently focused primarily on fulfilling previously secured orders. As of May 7, the operating rate among textile enterprises in key regions stood at 76.2%, representing a decline of 0.39% compared to two weeks prior.
International Market:
ICE cotton futures experienced a volatile week, initially declining before rebounding. At the start of the week, U.S. cotton prices plummeted sharply against the backdrop of a steep drop in international oil prices and rainfall in certain U.S. cotton-growing regions. However, on the 8th, oil prices rose once again—coinciding with non-farm payroll data exceeding expectations for the second consecutive month—while the latest drought alerts indicated that the proportion of U.S. cotton-producing areas affected by drought remained steady at 98%. Driven by these multiple bullish factors, ICE cotton futures surged to a nearly two-year high. As of the 8th, the settlement price for ICE cotton futures stood at 84.73 cents per pound.
Market outlook
In summary: Cotton sowing in Xinjiang has largely concluded, and expectations regarding a contraction in domestic planted acreage have strengthened. The national cotton sales rate has exceeded 90%, and the depletion of commercial inventories has accelerated. However, with the onset of the traditional off-season, textile enterprises lack strong incentives to procure; their capacity to absorb high-priced raw materials is limited, and most are maintaining a "buy-as-needed" strategy. Consequently, the demand side is unlikely to serve as a driver for upward price movements in the near term. Based on this comprehensive assessment, cotton prices are expected to enter a volatile, downward-leaning trend in the short term. Market participants should closely monitor the impact of weather conditions on the new cotton crop, as well as developments regarding policies on the rotation of state cotton reserves.
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