SunSirs: China Cotton Market Monthly Report for January 2026

In January, the international market maintained a relaxed supply-demand situation with ample cotton supply. Amidst intertwined global uncertainties, textile consumption remained sluggish, causing international cotton prices to continue fluctuating within the lowest range seen in the past five years. Domestically, the macroeconomic environment showed signs of improvement as policies to expand domestic demand gained momentum. Textile enterprises maintained high operating rates to stockpile inventory before the Spring Festival, supporting firm domestic spot cotton prices. The price differential between domestic and international cotton reached a new ten-year high.

Part I: Market Review

Internationally, in early January, reduced U.S. cotton planting intentions and accelerated spot sales led to a sustained decline in ICE cotton net short positions, driving up international cotton prices. Subsequently, driven by bearish fundamentals for the current year and external market volatility, international cotton prices reversed course and declined. As of January 29, the settlement price for the ICE Cotton futures main contract stood at 63.48 cents/lb, down 0.79 cents/lb or 1.23% from the end of last month. The International Cotton Index (M), representing the average landed cost of imported cotton at major Chinese ports, stood at 72.71 cents per pound. This translates to an import cost of RMB 12,454 per ton (based on a 1% tariff, excluding port handling fees), down RMB 60 per ton or 0.48% from the end of last month.

In the domestic market, expectations of reduced cotton planting area in Xinjiang have been gradually absorbed, reigniting market caution. Zhengzhou cotton futures prices retreated from their highs. However, due to rapid sales of new cotton and active restocking by downstream textile enterprises, ginning and trading companies maintained strong price support. Spot prices did not follow the futures decline and remained at elevated levels. As of January 29, the Zhengzhou Commodity Exchange's main cotton futures contract settled at CNY 14,900/ton, up CNY 350/ton or 2.41% from the end of last month. The National Cotton Price Index B, representing inland standard-grade lint cotton prices, stood at CNY 16,057/ton, rising CNY 546/ton or 3.52% month-on-month. The domestic-international price differential widened from 2,986 RMB/ton at the end of last month to 3,603 RMB/ton, reaching its highest level in nearly a decade.

II. Domestic Cotton Market

Regarding supply, sales of this year's new cotton have been brisk. The widening price gap between domestic and international cotton has led to a significant increase in cotton and cotton yarn imports. Recently, domestic cotton processing has largely concluded, with public inspections entering their final stages. Supported by earlier market releases and downstream consumption, cotton sales have accelerated significantly compared to previous years. As of January 22, 2026, the national cotton processing rate and sales rate stood at 97.3% and 62.7% respectively, translating to processed volumes of 7.19 million tons and sales of 4.631 million tons—increases of 621,000 tons and 2.016 million tons year-on-year. By January 28, nationwide public inspection of cotton reached 7.213 million tons, up 12.9% year-on-year. Additionally, driven by widening domestic-international price differentials and concentrated clearance of import quotas before year-end, cotton imports in December 2025 hit 180,000 tons—a 51.6% month-on-month increase and the highest monthly volume since July 2024. As domestic yarn costs rose alongside cotton prices, downstream buyers increased their procurement of imported yarn. Cotton yarn imports reached 170,000 tons in December 2025, a 15.1% increase from the previous month, marking the highest level since October 2023.

Regarding consumption, exports showed marginal improvement while domestic sales maintained resilience, with textile enterprises operating at relatively high capacity utilization rates. Driven by domestic consumption stimulus policies, retailer promotions, and an improved foreign trade environment, domestic sales of textiles and apparel surged significantly by the end of 2025, while exports also showed some improvement. According to the latest data, in December 2025, domestic sales reached CNY166.1 billion, a 7.8% increase month-on-month; while exports reached $25.99 billion, up 8.9% month-on-month. Spinning output maintained positive growth, with Xinjiang's yarn production hitting a yearly high of 315,000 tons in December 2025, a 1.9% increase from the previous month. Nationwide yarn output rose 4.6% month-on-month. Both textile factory operating rates and industrial cotton inventories showed upward trends, while yarn and fabric production-to-sales ratios also improved. In early January 2026, the national textile enterprise operating rate reached 86.9%, up 4.1 percentage points month-on-month; industrial inventory stood at 861,000 tons, a 1.5% increase month-on-month; yarn and fabric production-sales ratios were 100.7% and 101.1% respectively, rising by 3.0 and 1.1 percentage points month-on-month.

Key Conclusions

Overall, China's cotton industry has operated smoothly recently, with cotton prices remaining relatively firm due to strong consumption support. As the Spring Festival holiday approaches, market speculation is gradually cooling. Meanwhile, the significant widening of the domestic-international price differential is restraining further price increases. Domestic cotton prices are expected to fluctuate next month, with industry focus shifting to international markets during Zhengzhou Cotton Exchange's closure. Currently, international cotton supply remains ample with active procurement. Considering the rising expectations of tighter global supply in the new season, international cotton prices are expected to fluctuate with an upward bias. Key attention should be paid to the impact of the U.S. cotton planting intentions to be released in February on cotton prices.

Part II Analysis and Outlook

I. International Cotton Market

From the perspective of production and demand fundamentals, the global cotton supply-demand landscape remains ample this year, though conditions may tighten next year. According to the USDA's January 2026 forecast, global cotton production this year is projected at 26 million metric tons, up 0.8% year-on-year; global cotton consumption is estimated at 25.89 million metric tons, down 0.02% year-on-year. with a surplus of 110,000 tons, maintaining the current year's supply-demand balance. Notably, China and Brazil recorded substantial production increases, while India and Pakistan maintained stable output levels. The United States and Australia experienced slight declines. Recently, international cotton trading activity has been vigorous, with major producing countries achieving rapid export progress. By the end of November 2025, Australia's cumulative cotton exports reached 677,000 metric tons, up 11.2% year-on-year, with an export progress rate of 58.3%. By the end of December, Brazil's cumulative exports totaled 1.405 million metric tons, a 16% increase year-on-year, with a progress rate of 44.5%. U.S. cotton shipments reached 710,000 metric tons, up 10.7% year-on-year, at a progress rate of 26.7%.

Reduced planting areas in major cotton-producing countries coupled with intensifying El Niño phenomena are expected to tighten supply in the coming year. Currently, Brazil's cotton planting is at its peak with approximately 40% completed, while Australia's cotton planting has concluded. According to the latest projections, Brazil's 2026 planting area is expected to decrease by 5% year-on-year to 30.75 million mu, and Australia's cotton planting area is projected to decline by 22% year-on-year to 6.09 million mu. China plans to reduce Xinjiang's cotton planting area to 36 million mu, and the U.S. cotton planting intentions have decreased by 2.9% year-on-year. Additionally, the APEC Climate Center and the Australian Bureau of Meteorology have issued warnings that an El Niño phenomenon may form by mid-year, potentially impacting cotton growth in countries like India. Influenced by these factors, global cotton production next year may see a certain degree of decline compared to this year. If cotton consumption demand remains largely unchanged, the global cotton supply-demand balance next year is expected to shift from ample to tight.

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