SunSirs: Amidst a Tug-of-War Between Bullish and Bearish Forces, Cotton Prices in March Fluctuated to Be Stronger

In March 2026, the domestic cotton market exhibited an overall trend characterized by an initial decline followed by a rebound, marked by an interplay between bullish and bearish forces and generally strong, volatile fluctuations. At the beginning of the month, the market faced downward pressure and underwent a correction due to disruptions stemming from geopolitical tensions in the Middle East. During the middle and latter parts of the month, however, prices trended upward amidst volatility, bolstered by bullish factors such as tightening supply-demand dynamics, rising prices for substitute products, and a resurgence in demand during the peak season. Toward the end of the month, the market quickly recovered after experiencing brief disruptions related to the finalization of import quotas; consequently, spot prices ended the month at a higher level than at the start. According to data from SunSirs, as of March 30, the spot price for Grade 3128B ginned cotton stood at 16,819 RMB/ton—an increase of 1.08% compared to the beginning of the month.

In the futures market, as of the 30th, the settlement price of the benchmark Zhengzhou Cotton futures contract stood at 15,405 RMB/ton—an increase of 145 RMB/ton from the beginning of the month, representing a gain of 0.95%. Meanwhile, as of the 27th, the settlement price of the benchmark ICE Cotton futures contract was 69.46 cents, up 4.87 cents from the start of the month, marking a gain of 7.54%.

Key Influencing Factor: Intensifying Bull-Bear Struggle

In March, the cotton market was characterized by an interplay of bullish and bearish factors; multiple variables—including geopolitical tensions, industrial policies, supply-and-demand fundamentals, and the prices of substitute products—collectively drove price trends. While short-term bearish factors triggered only temporary corrections, underlying bullish support remained consistently present over the medium to long term.

Bullish Factors: Tightening Supply + Peak Season Demand + Rising Prices of Substitutes + Domestic-International Linkage

Expectations of tightening supply in the new year had strengthened, providing solid support for forward markets.

The Government Work Report of the Xinjiang Uygur Autonomous Region explicitly states that, in 2026, Xinjiang's total cotton output is projected to stabilize at approximately 5.6 million tons—a 9.2% decrease compared to the 6.165 million tons produced in 2025. To achieve this objective, Xinjiang plans to reduce its cotton cultivation area by 5 to 7 million mu relative to 2025; this represents the most significant adjustment to planting scale seen in recent years. Although market participants remain divided regarding the actual extent to which these planting area reductions will be implemented, the fundamental logic of a contracting supply in the new crop year has firmly taken shape, thereby providing long-term floor support for cotton prices.

Demand for the "Golden March, Silver April" peak season had materialized

Downstream textile enterprises have accelerated the resumption of work and production, with operating rates continuing their upward trend; by the end of March, these rates remained at a high level of approximately 78%, indicating a stabilization in production and business operations. As of March 26, the national processing rate stood at 99.7%—flat year-on-year, yet 0.3 percentage points higher than the average of the preceding four years. Meanwhile, the national sales rate reached 79.2%—an increase of 17.5 percentage points year-on-year, and 20.9 percentage points higher than the four-year average.

Prices of Synthetic Fiber Substitutes Soared, Highlighting Cotton's Competitive Advantage

Geopolitical conflicts in the Middle East have driven up international oil prices, leading to a substantial surge in the cost of chemical fiber raw materials. The price of polyester POY alone rose by 30% this month; as prices for polyester and other chemical fiber products tracked these rising raw material costs, their competitive advantage as substitutes for cotton was significantly eroded. Consequently, the cost-effectiveness of cotton has improved, reinforcing consumer demand resilience and directly boosting cotton prices.

Global cotton prices had risen in tandem, with overseas markets providing positive support.

In March, the U.S. cotton market witnessed gains that outpaced those in the domestic market. This surge was primarily driven by expectations of a reduction in U.S. cotton acreage; industry analysts now project that U.S. cotton planting area will decline to 9.229 million acres in 2026—down from the previous estimate of 9.4 million acres. Concurrently, rising U.S. cotton production costs, tight fertilizer supplies, and intensifying drought conditions in key growing regions combined to create a confluence of bullish factors that propelled U.S. cotton prices sharply upward. Furthermore, robust U.S. cotton export sales data—along with the accelerating pace of new-crop contracting—served to offset the bearish implications of the USDA's March Supply and Demand Report, thereby establishing a positive correlative support for domestic cotton prices as international markets strengthened.

Bearish Factors: Additional Quota Issuance + Domestic-Foreign Price Spread — Capping Short-Term Upside

Issuance of an additional 300,000 tons of import quotas increases near-term supply pressure.

The National Development and Reform Commission (NDRC) has issued an announcement regarding the 2026 quota for cotton imports subject to sliding-scale tariffs under processing trade arrangements. This announcement introduces an additional quota of 300,000 tons, to be allocated based on valid contracts; notably, the issuance date has been advanced by five months compared to previous years, and the validity period for utilizing the quota has been extended to three months. Although the incremental increase of 300,000 tons represents a rise of only 100,000 tons over last year—keeping the total volume within market expectations—it nonetheless serves to boost domestic cotton supply in the short term. This effect is compounded by the fact that China's cotton imports for January and February reached 370,000 tons (a year-on-year increase of 41.0%); given their cost advantage, imported cotton remains highly favored by enterprises, thereby exerting downward pressure on domestic cotton prices and triggering a phase of price correction.

The wide spread between domestic and international cotton prices was constraining the upside potential of domestic cotton prices.

Throughout March, the premium of domestic cotton prices over international prices remained persistently high; consequently, imported cotton held an overwhelming cost advantage. As a result, enterprises demonstrated a far greater inclination to procure imported cotton than domestic cotton. This widening price spread between domestic and international markets directly constrained the upside potential of domestic cotton prices, emerging as a significant bearish factor in the market in the short term.

Market outlook: Driven by bullish factors, the market is expected to experience stronger, volatile trading in the short term.

Overall, the cotton market in March successfully completed a bottoming-out and recovery phase amidst a tug-of-war between bullish and bearish forces. By month-end, negative factors had been largely digested; with domestic and international fundamentals leaning generally bullish—and positive factors taking the lead—domestic cotton prices are expected to maintain a trend of strong, volatile fluctuations in the short term. Moving forward, close attention must be paid to the potential market disruptions caused by three key factors:

The Sustainability of "Silver April" Peak Season Orders: The actual realization of orders for April among downstream textile enterprises—along with the intensity of demand release—will directly determine the sustainability of cotton consumption. Should orders continue their upward trend, cotton prices will receive a further boost; conversely, if orders fall short of expectations, a market correction could ensue.                                        

External Macroeconomic and Geopolitical Factors: External factors—such as the pace of global economic recovery, the evolving geopolitical landscape in the Middle East, and trends in international oil prices—will indirectly influence cotton price movements by impacting overall sentiment in the commodities market, the cost of chemical fiber raw materials, and foreign trade exports.

Weather Conditions and Actual Planting Acreage in Major Production Regions: Weather fluctuations in major domestic and international cotton-producing regions (such as Xinjiang and the United States)—particularly the occurrence of extreme weather events—would directly disrupt the planting of new cotton crops and impact yield expectations; additionally, the actual pace of the reduction in cotton acreage in Xinjiang is a key factor to monitor.

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