SunSirs: Emerging Tight Supply-Demand Balance in China’s 2026 Cotton Market

The policy trend of reducing cotton planting area in 2026 is clear, and the planting intention of cotton in Xinjiang has dropped year-on-year, and the situation of reduced supply is gradually taking shape. At the same time, the continuous commissioning of cotton textile production capacity in Xinjiang has boosted cotton demand, and the expectation of tight supply and demand in the cotton market will gradually become a reality.

According to the centralized research conducted by Zhuochuang Information in mid-to-early March, the intended cotton planting area will decline somewhat in 2026, mainly because Xinjiang, the major cotton-producing area, has clearly formulated a policy reduction plan. Specifically, reductions will be implemented in non-suitable cotton-growing areas, areas with severe over-extraction of groundwater, newly reclaimed wasteland cotton-growing areas, and low-yield and inefficient cotton-growing areas. This will drive the transformation of land resources toward high-efficiency and sustainable utilization, achieving coordinated development of food security, ecological protection, and the cotton industry. According to the preliminary research results released by Zhuochuang Information on participating entities such as individual farmers, agricultural cooperatives, and planting enterprises, the year-on-year decline in Xinjiang's cotton planting area in 2026 is expected to be between 3% and 5%.

Regionally, the progress of cotton acreage reduction is complex. In the northern Xinjiang cotton-growing area, a certain proportion of cotton fields are withdrawn to grow grain. In southern Xinjiang, in addition to converting cotton fields to grow grain, soybeans and peanuts, some local areas need to be left fallow. In terms of the reduction scale, the reduction magnitude in southern Xinjiang this year is slightly higher than that in northern Xinjiang. The fundamental reason is that southern Xinjiang has relatively abundant groundwater resources, while some areas in northern Xinjiang have implemented fallowing, crop rotation and other adjustments earlier than southern Xinjiang. In addition, from the perspective of the reduction ratios of cotton planting areas in various counties and towns this year, there are obvious differences among most of them. On the one hand, local policy adjustments take into account the actual local conditions: high-quality cultivated land is retained preferentially, and reclaimed wasteland is withdrawn collectively. Meanwhile, under the support of relevant policies, corresponding subsidies are provided for some fallow fields to balance farmers' income and achieve the overall adjustment goals.

Meanwhile, the in-situ conversion capacity of raw materials in the downstream markets within Xinjiang has improved, and commercial inventories have steadily declined. According to monitoring by Zhuochuang Information, China's cotton commercial inventories have entered a destocking cycle since January this year, with inventories falling steadily month-on-month and also declining to a certain extent year-on-year. The estimated commercial inventory in March was 5.41 million tons, a decrease of 8% year-on-year. Given that Xinjiang's cotton production increased by nearly 1 million tons last year, the year-on-year decline in commercial inventories is driven by the rising demand in Xinjiang's cotton textile market. In the past two years, the downstream textile production capacity in Xinjiang has continued to grow, and the in-situ conversion rate of cotton within the region has increased, driving the steady growth of domestic cotton consumption. In addition, the raw material inventory of the downstream sector of the industry was generally low last year. After the listing of new cotton in October, many textile enterprises concentrated on stocking up. Coupled with the continuous rise in cotton prices, it further stimulated the stocking scale of textile enterprises, and the optimistic expectation of cotton demand has become an industry consensus.

It is worth noting that the trend of policy-driven reduction in cotton planting area in Xinjiang in 2026 is clear. Some large-scale cotton farmers are worried that they will bear a higher proportion of the reduction than individual farmers, leading to a strong atmosphere of hesitation. Coupled with the significant year-on-year increase in cotton prices in the first quarter of this year, their enthusiasm for continuing cultivation is high. On the other hand, however, the proportion of policy-driven reduction in some regions is relatively high, and the policies have not yet been fully implemented. Therefore, there is still a certain degree of uncertainty regarding the actual final reduction in cotton planting area.

In summary, the decline in cotton planting area on the supply side for the new year is basically a foregone conclusion, and the expansion of downstream textile production capacity on the demand side will boost the growth in cotton demand. The initial signs of a tightening supply-demand situation in the cotton market in 2026 have emerged. With the sowing of new cotton underway, the reduction in supply will gradually become a reality. The positive fundamentals for cotton prices will drive them to perform strongly, and the strong expectation is likely to gradually shift to a strong reality.

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