New-crop arrivals and reserve sales weigh on China's cotton market

At the same time, downstream textile mills have entered the peak-season, but the recovery in demand lacks momentum and provides limited support.

In the producing areas, machine-picked cotton is maturing steadily, and some early-maturing cotton in northern and southern Xinjiang has already seen scattered picking and marketing. Earlier, hand-picked cotton in southern Xinjiang fetched around Yuan 9/kg, but as the marketing period approaches, prices have fallen back to around Yuan 8.4/kg.

Compared with previous years, cotton maturation in Xinjiang in 2026 is slightly earlier overall, with concentrated picking and marketing of new cotton expected over the next two weeks. As the new cotton marketing window approaches, wait-and-see sentiment has increased, willingness to sell old-crop spot cotton has risen, textile enterprises are mostly buying on demand, and trading remains cautious.

The central reserve cotton has continued its normalized rotation-out and release pace, with daily auction volumes stable at around 8,000 tonnes, continuing to add spots in the market and directly suppressing cotton prices. On September 15, 2026, the planned listed volume for reserve auctions was 8,013.6518 tonnes, with a transaction rate of 96.76% and an average transaction price of Yuan 16,876.93/tonne.

Overall, the reserve auctions' floor price has been stable and transactions active, supported by enterprises' rigid restocking needs, but the average price has continued to decline slightly. That is, the pressure on spot supply in the market has eased somewhat, cotton prices lack upward momentum, and signs of weakness have emerged.

Overseas, the USDA's August global cotton supply and demand balance sheet further strengthened expectations of ample global supply, creating a linked bearish impact on the domestic market.

The report showed that for 2025/26, global cotton production was slightly revised upward, consumption rose month on month, and ending stocks fell slightly year on year, but the overall inventory base has remained high. For 2026/27, global cotton production and consumption were both revised upward, and the tight balance in global cotton supply and demand has eased somewhat.

For U.S. cotton, the impact of drought weather in producing areas has weakened marginally, the good-to-excellent rate has remained stable, and the earlier sentiment of weather-driven production cuts has completely cooled. Combined with long funds taking profits at high levels, the U.S. cotton prices retreated noticeably after spiking, further dragging down sentiment in the domestic cotton market.

Although bearish news currently dominates trading in both domestic and international cotton markets, the 2026–2028 Cotton Target Price Policy Implementation Plan issued by China's National Development and Reform Commission and the Ministry of Finance newly introduced in May 2026 has provided support for cotton price movements through 2026. The policy clearly sets the Xinjiang cotton target price for 2026-2028 at 18,600 yuan/tonne, unchanged for three years, and also sets the annual total subsidized production ceiling for Xinjiang cotton at 5.1 million tonnes, with production above that level no longer eligible for subsidies.

In summary, in the short term, long-short contention in the domestic cotton market has intensified. The pace of new cotton listing is accelerating, expectations for an ample new-season crop supply are clear, and reserve cotton continues to supplement spot circulation. On the demand side, the peak season is recovering moderately, limiting the room for a sharp decline in cotton prices. Under the balance of long and short forces, the market is mostly showing range-bound adjustment.

Going forward, the market still needs to closely track the progress of Xinjiang's new cotton picking and listing as well as new cotton bids. The pace of concentrated new cotton listing in mid-to-late September will directly bring short-term supply pressure. At the same time, attention should be paid to the strength of downstream end-user order recovery, which is also the core variable determining the subsequent direction of cotton prices.

In addition, it is necessary to watch for changes in reserve cotton rotation-out transaction prices and the end of releases, as well as the external market linkage effects brought by subsequent USDA monthly report adjustments and macroeconomic exchange rate fluctuations.