SunSirs: Zhengzhou Cotton Futures Fell Below the 17,000-RMB/Ton Mark, and the Tug-of-War over the Initial Purchase Price of New Cotton Became the Focal Point

Last week (August 31-September 4), cotton prices in both domestic and international markets trended downward in tandem. Data from the SunSirs commodity market analysis system shows that as of August 31, the spot price for domestic Grade 3128B lint cotton stood at 18,180 RMB/ton, a weekly decline of 1.3%. The dominant Zhengzhou cotton futures contract (2701) pulled back after previously breaking through the 17,000 RMB/ton mark, closing at 16,825 RMB/ton on September 4—down 1.4% for the week.

Domestic Market Analysis

State Cotton Reserve Auctions: Continued release with a 100% sales rate.

The rotation of state cotton reserves, which began on July 20, has maintained a 100% transaction rate. As of September 3, a total of 272,717.9860 tonnes of reserve cotton had been listed for sale and successfully sold, resulting in a cumulative transaction rate of 100%. The average transaction price stood at 17,297.21 RMB/ton, with the price adjusted to the "3128B" grade equivalent at 17,946.07 RMB/ton. The continuous release of reserve cotton has provided the market with a stable incremental supply, while simultaneously capping the upside potential for cotton prices.

New Cotton Market Entry: Expectations of Reduced Yields Gradually Materialize Amid Significant Divergence on Cost-Related Views

Cotton in Xinjiang has widely entered the boll-opening stage, with defoliants applied early in some fields, reinforcing expectations for the arrival of the new crop. The earlier driver of yield reduction due to high temperatures is gradually shifting from expectation to reality, and the marginal bullish impact is beginning to wane.

There is a significant divergence regarding procurement costs: cotton farmers generally anticipate higher opening prices, considering 7.5 yuan/kg to be reasonable, whereas ginning plants view these levels as excessive—translating to lint costs of 17,600 RMB/ton and 16,200 RMB/ton, respectively, based on a 40% lint turnout rate. Given the high price levels, ginning plants are inclined to adopt a cautious purchasing strategy. Market observers warn of the risks associated with a sharp price drop should production cuts fall short of expectations, as well as the risk of declining costs if opening prices start high but subsequently fall.

Downstream Demand: Peak Season Underway but Lacking Momentum

The market is currently in the traditional "Golden September and Silver October" peak demand season. While operating rates at downstream textile enterprises have seen a slight month-on-month increase, inventories of both raw materials and finished goods have declined, indicating that substantial restocking has not yet begun. Overall, the industry presents a picture of a peak season that is gradually unfolding but lacks significant momentum. Spinning margins remain poor, making enterprises cautious about restocking at higher price points; purchasing is largely driven by immediate operational needs. As of September 4, the operating rate of textile enterprises in major regions stood at approximately 68.9%.

International Market Analysis

Global Supply-Demand Landscape: The Expectation Gap—Shifting from Tight Supply to a Slight Surplus

ICAC September Report Bearish: On September 2, the International Cotton Advisory Committee (ICAC) released its September report, projecting global cotton production for the 2026/27 season at 26.2 million tonnes—slightly exceeding the estimated consumption of 25.9 million tonnes—indicating a modest supply surplus of approximately 300,000 tonnes. However, the report also noted that early-season production risks, such as weather fluctuations and pest threats, could narrow this supply-demand margin as the crop develops.

US Cotton: Expectations of Reduced Production Rise Amid Weak Export Demand

Weather: Drought conditions in US cotton-growing regions continue to worsen, fueling expectations of reduced production. The USDA crop progress report indicates that for the week ending August 30, the "good-to-excellent" rating for US cotton stood at 39%—up from 37% the previous week but still significantly lower than the 54% recorded during the same period last year. Boll setting reached 89%, while 29% of the crop had reached the peak boll-setting stage.

Regarding exports, weekly sales commitments for U.S. cotton plummeted by 71% week-on-week; limited improvement in demand may cap further upside potential. As the market impact of weather-related speculation waned in the short term, a sustained, sharp pullback in overseas markets dragged down domestic prices.

Summary

Last week, the cotton market was influenced by a mix of bullish and bearish factors, resulting in a synchronized pullback in both domestic and international cotton prices. Internationally, expectations of reduced U.S. cotton production coincided with sluggish exports, and the September ICAC report signaled a bearish outlook. Domestically, the continued release of cotton reserves and the impending arrival of the new crop created supply pressure, while a marginal improvement in downstream demand during the peak season provided some support. In the short term, the market lacks a unified directional trend; Zhengzhou cotton futures are expected to fluctuate within a wide range. Close attention should be paid to weather conditions affecting U.S. cotton, initial purchase prices for the new crop, and the actual strength of downstream peak-season demand.

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