Short-term high temperatures will boost cotton prices. From a medium to long-term perspective, low inventories and reduced production in the new season will support cotton prices.

On June 29, the main cotton contract CF2609 surged 2.49% to close at 16,070 yuan per ton. The upward momentum carried over into the following day. After a pullback the prior week, the cotton market reignited bullish sentiment with a long bullish candlestick.

"The current rise is mainly driven by macro expectations," Liu Lin from the Investment Consulting Department of Chang'an Futures told reporters in an interview. Market bets on breakthroughs in Sino-European economic and trade talks, coupled with the geopolitical premium stemming from repeated tensions between the United States and Iran, together form the core logic behind this rally in cotton prices.

Liu Lin said that from the perspective of timing, the recent rise in cotton prices comes at a critical juncture of two major events. On June 29 local time, China's Minister of Commerce Wang Wentao and the European Commission's Trade and Economic Security Commissioner Šefčovič held the first meeting of the China-EU Trade and Investment Consultation Mechanism in Brussels and issued a joint statement. The two sides agreed to establish a joint monitoring mechanism to manage trade frictions and also agreed to hold another ministerial-level meeting in the fall of 2026. The market's previous bet that this high-level meeting would deliver certain outcomes has now been preliminarily confirmed.

Meanwhile, the US-Iran situation has once again become a focal variable in geopolitical terms. According to media reports, the US and Iran have agreed to stop mutual attacks and plan to continue negotiations in Doha on June 30. However, Iran's Deputy Foreign Minister Gharibabadi stated on June 29 that the so-called technical negotiations in Doha this week are not true, and the situation still has the possibility of repetition. Liu Lin said that if the US-Iran situation eases and drives down crude oil prices, the cost of short fibers will follow suit, thereby weakening the comparative advantage of cotton; on the contrary, if the situation becomes tense again, the geopolitical premium will continue to support cotton prices.

In addition to macro expectations, weather factors have become the direct fuse that lit the fuse. Wang Xiaobei, cotton analyst at Su Hao Hongye Futures, said that the results of the special survey of the National Cotton Market Monitoring System show that the actual planting area of cotton in the country in 2026 was 46.32 million mu, a year-on-year decrease of 3.1%, including a decrease of 3.4% in the Xinjiang region; superimposed on the fact that the main production area of Xinjiang is about to experience the strongest high-temperature process since the beginning of summer, market sentiment has been ignited.

According to the important weather warning issued by the meteorological department of Xinjiang, from June 30th to July 5th, most parts of Xinjiang will experience the strongest high temperature process since the beginning of summer, with temperatures in southern and eastern Xinjiang lasting until July 8th. Some areas in the southern Xinjiang Basin and Turpan will have their highest temperatures exceeding 40℃, and local areas may reach above 45℃. The meteorological department also reminds that many cotton-growing areas in Xinjiang are currently facing a high risk of high temperature heat damage, which may have an adverse effect on the growth and development of cotton.

From a fundamental perspective, Liu Lin believes that the sustainability of the cotton price rebound still needs to be further verified. On the supply side, the first crop growth report from the US Department of Agriculture shows that as of the week ending June 21, 2026, the excellent rate of US cotton stands at 53%, up from 50% in the previous week and also higher than the 47% recorded in the same period last year; its planting progress has reached 92%, an acceleration from the prior week’s 86%, yet slightly lower than last year’s 91% and the 5-year average of 94%. Although the market remains under the influence of El Niño weather patterns, easing drought conditions have dampened production cut expectations, resulting in weaker performance in overseas markets compared with domestic ones. On the demand side, the domestic textile industry is displaying off-season characteristics. Following the run-up in cotton prices, downstream manufacturers mostly only conduct necessary inventory restocking. Corporate operating rates are gradually falling, alongside lackluster domestic sales performance. Meanwhile, large-scale autumn and winter order placements have yet to commence, and the lengthy export transmission cycle has further contributed to cautious sentiment across the overall market.

Wang Xiaobei said global and domestic cotton production is being cut simultaneously, and the supply and demand pattern is continuously improving. Global cotton planting area is shrinking, and the El Nino disaster weather has disturbed the new cotton production, and the global cotton total production is expected to be reduced, and the supply and demand pattern has shifted from surplus to gap. Domestically, the cotton area in Xinjiang has been reduced, resulting in a significant decrease in production, while consumption has increased slightly. The cotton market is gradually shifting from loose to tight balance, and the medium and long-term fundamentals are turning from weak to strong, which opens up the space for prices to rise. The demand side shows a cautious and optimistic trend, the economic and trade relations between China and the United States have eased marginally, and the tariff friction has cooled off temporarily. From January to May this year, the proportion of domestic textile and apparel exports to the United States increased year-on-year, and this trend is expected to continue in the second half of the year.

Wang Xiaobei believes that since this year, the domestic cotton apparent consumption has performed well compared to the same period last year, and the pace of commercial stockpiles nationwide has been relatively fast. As of mid-June, the national cotton commercial stockpiles were 3.414 million tons, an increase of 287,000 tons year-on-year. If the subsequent reserve cotton rotation policy is not implemented in time, and there is a transition period between old and new cotton varieties in July and August, the inventory in the circulation link will further contract, which may trigger market concerns about short-term supply.

Looking ahead to the future market, Wang Xiaobei said that short-term high temperatures will boost cotton prices. In the medium and long term, low inventories and reduced production in the new season will jointly support cotton prices. If the large-scale storage policy is not implemented and there is no bearish macro news, the overall trend of cotton prices is expected to rise, and it is necessary to continue to closely track the weather in the cotton-producing areas of the main producing countries, the implementation rhythm of the domestic reserve cotton policy, and changes in the macro situation.

Liu Lin believes that the current cotton price's short-term upward momentum still depends on immediate news, and close attention should be paid to relevant news in the past two days, such as the China-EU trade negotiations and the situation between the United States and Iran. In the medium and long term, with the background of high cotton prices, demand-side data may become the core of market trading.

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