Last week (August 24-31), domestic cotton prices followed a trend of initial decline followed by a rebound; speculation driven by weather conditions intensified, and the debate over expected production cuts—fueled by disruptions from high temperatures—heated up. According to data from the SunSirs commodity market analysis system, the spot price for domestic Grade 3128B lint cotton stood at 18,419 RMB/ton as of August 31, marking a 5.63% increase since the beginning of the month. With less than a month remaining before the large-scale market launch of the new cotton crop, domestic cotton prices have climbed to their highest level of the year.

The pace of new cotton boll opening is accelerating; the procurement season may begin early.

As of August 24, 2026, cotton across Xinjiang has entered the peak boll-opening stage, with an average boll-opening rate of approximately 18.0%—an increase of 7.0 percentage points from two weeks prior. Due to the accelerated pace of boll opening, cotton farmers plan to apply defoliants in early September, about 10 days earlier than in 2025. Cotton processing enterprises in Xinjiang have largely completed machinery maintenance and equipment calibration, and funding applications are proceeding smoothly; preparations for the procurement season are complete. Currently, the purchase price for hand-picked seed cotton in some areas is around 8.0 RMB/kg, while industry forecasts suggest the opening price for machine-picked seed cotton will likely range from 7.20 to 7.40 RMB/kg.

State Reserve Auction: 100% Clearance Rate Maintained; Transaction Prices Rise

Essential inventory replenishment by textile enterprises ahead of the peak "Golden September and Silver October" season provided strong support for the auctions, driving a continuous rise in the average transaction price of state-reserve cotton. From August 24 to August 28, China State Reserve Cotton Management Co., Ltd. listed a total of 40,142.1170 tonnes of reserve cotton; the entire volume was sold, resulting in a 100% clearance rate. The average transaction price was 17,463.44 RMB/ton (equivalent to 18,172.16 RMB/ton for standard-grade "3128" cotton), with an average price premium of 1,184.16 RMB/ton; the highest transaction price was 18,300 RMB/ton, and the lowest was 17,090 RMB/ton.

Between July 20 and August 28, the cumulative volume listed totaled 240,683.76 tonnes, with a total transaction volume of 240,683.76 tonnes, representing a 100.00% clearance rate. The average transaction price was 17,264 RMB/ton (equivalent to 17,911 RMB/ton for "3128" grade cotton), with an average price premium of 1,434 RMB/ton.

Downstream Demand: Off-Season Trends Persist with Slight Marginal Improvement

The operating rate of textile enterprises in major domestic regions stands at 68.7%; while this represents a 0.2 percentage point decline from the week before last, it is 2.8 percentage points higher than the same period last year. The downstream textile industry has yet to see a significant overall recovery; the pace of work resumption in the grey fabric market remains slow, and orders are predominantly small-scale and short-term. However, the high operating rates of textile enterprises provide strong support for the baseline demand for raw cotton. The market is closely watching whether the traditional "Golden September and Silver October" peak season will bring a marginal improvement in demand, as this is a key variable determining whether cotton prices can continue to rise in the short term.

International Cotton Market: Weather-driven speculation intensifies; US cotton hits a recent high.

The compounding effects of persistent drought in U.S. cotton-growing regions and expectations of El Niño weather conditions, combined with a temporary weakening of the U.S. dollar, have driven international cotton prices to continue their upward trend. According to USDA data, as of August 25, approximately 52% of U.S. cotton-growing areas were affected by drought (up 8 percentage points from the previous period), with Texas seeing about 72% of its area affected (up 13 percentage points). The continued deterioration of drought conditions in key producing regions has intensified market concerns regarding a potential reduction in U.S. cotton output.

On August 27, the benchmark cotton futures contract in New York surged 3.67% to 92.75 cents per pound, hitting a new high since April 2024. The average settlement price for the benchmark contract last week was 90.02 cents per pound, an increase of 2.83 cents (or 3.2%) from the prior week. The strong performance of international cotton prices has provided a significant boost to market sentiment and price support for domestic cotton.

Market outlook

Overall, the current cotton market is characterized by a tug-of-war between bullish and bearish factors at a high price level. In the short term, cotton prices retain a basis for remaining firm, supported by weather-related speculation in overseas markets and solid domestic demand; however, the scope for significant further upside is limited by the dual pressures of policy constraints and expectations of increased supply. Key factors to monitor going forward include: weather conditions in US cotton-growing regions and the USDA's September supply-and-demand report; weather conditions in Xinjiang during the defoliant application period and actual initial purchase prices across production areas; the actual volume of orders realized by textile enterprises during the "Golden September and Silver October" peak season; and any potential adjustments to the daily listing volume of state reserve cotton.

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