SunSirs: Supported by Multiple Positive Factors, Cotton Prices Rose Sharply in December

Price trend:

Since December, domestic cotton prices have risen sharply, mainly due to the potential impact of policies that may reduce the planting area in Xinjiang next year. This, coupled with generally good production and sales in the downstream textile industry and rising prices, has led to strong market sentiment. According to SunSirs' commodity price analysis system, as of December 30th, the spot price of 3128B grade lint cotton was 15,539 RMB/ton, a 4.04% increase compared to the beginning of the month.

Futures market: As of December 30th, the settlement price of the main Zhengzhou cotton futures contract was 14,510 RMB/ton, an increase of 750 RMB/ton compared to the beginning of the month, representing a 5.5% increase. International cotton prices remained weak and trended downwards. As of December 29th, the settlement price of the main ICE cotton futures contract was 64.35 cents/pound, a decrease of 0.28 cents/pound compared to the settlement price at the beginning of the month, representing a 0.4% decrease.

The domestic cotton market was showing a trend of "rapid sales and stable demand."

Over half of the new cotton crop had been sold: As of December 25th, the national sales rate of new cotton exceeded 50%, a significant increase of 25.1 percentage points year-on-year. Processing progress exceeds 90%: The processing rate of new cotton exceeded 90%, an increase of 1.1 percentage points year-on-year.

Inspection volume increased: The inspection volume during the same period reached 6.064 million tons, a year-on-year increase of 13.8%.

In 2025, the total national cotton production increased by 7.7% year-on-year

In 2025, the national cotton planting area reached 2,979.2 thousand hectares (44.687 million mu), a year-on-year increase of 5.0%. The national average yield of cotton per unit area was 2,229.0 kg/hectare (148.6 kg/mu), a year-on-year increase of 2.6%. The total national cotton output reached 6.641 million tons, a year-on-year increase of 7.7%. Among them, Xinjiang, the main cotton-producing region, saw its cotton output exceed 6 million tons for the first time, reaching 6.165 million tons, accounting for 92.8% of the national total. The announcement shows that Xinjiang's cotton planting area was 38.875 million mu, and the yield of ginned cotton was 158.6 kg/mu, both showing a slight increase compared to the previous year. The yield per mu in Xinjiang was 10 kg higher than the national average.

Market sources indicate that the planting area in Xinjiang will decrease significantly next year

According to market sources, Xinjiang held a special meeting to discuss reducing cotton planting area. As of December 30, there was no confirmed information regarding specific policies, but if true, Xinjiang's planting area will decrease significantly next year. The 2025/26 season is the final year of the target price subsidy policy of 18,600 RMB/ton, and the policy is likely to change in the 2026/27 season. It is crucial to closely monitor the new target price subsidy rules: a reduction in the new subsidy standard could lead to a decrease in Xinjiang's cotton planting area.

International cotton prices fell slightly in December

In December, international cotton prices experienced a slight decline, and the price difference between domestic and international cotton widened slightly again. Supported by significantly improved U.S. cotton export data and positive U.S. macroeconomic indicators, the international cotton market rebounded from its lows towards the end of the month. With the prospect of further interest rate cuts by the Federal Reserve next year, if U.S. cotton export data continues to improve, cotton prices are expected to recover.

Rising raw material prices were suppressing demand

Due to the significant increase in raw material prices, downstream fabric manufacturers reduced orders, and their acceptance of higher prices was limited. New orders in the market had contracted, and market participants were adopting a wait-and-see attitude. As of December 30, the market is in its off-season; although sales are still acceptable, the weaving sector is contracting, and price transmission has not yet been synchronized. As of December 25th, the operating rate of textile enterprises in mainstream regions was 64.7%, a decrease of 0.77% compared to the previous week. Last week, there was no significant increase in new orders for inland textile enterprises. Downstream fabric manufacturers had insufficient orders, and some textile enterprises had reduced their operating rates to alleviate inventory pressure. Inland operating rates were at 50-60%, while operating rates in Xinjiang remained stable at over 90%.

Market Outlook

The cotton prices reflect factors such as the reduction in domestic cotton acreage. However, the driving forces behind further price increases were gradually weakening. Towards the end of the year, textile demand is showing divergence between domestic and international markets, with clear signs of a seasonal slowdown. Demand for low-count yarns and conventional grey fabrics was under pressure, limiting textile companies' profits and willingness to replenish stocks. With the New Year holiday approaching, domestic cotton prices are expected to fluctuate upward in the short term, but with limited upside potential. Caution is advised regarding the risk of a price correction.

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