Key Points: In September, domestic cotton prices suffered a notable decline, pressured by a moderation in global production-cut expectations, a disappointing performance in the traditional "Golden September" downstream demand period, and macroeconomic jitters from potential Fed rate hikes. Looking ahead, with cotton entering the boll-opening and harvesting phase, weather-related disruptions are diminishing, and most of the previous output reduction forecasts have already been priced in, weakening the bullish narrative. Furthermore, the upcoming concentrated arrival of new cotton will intensify supply-side pressure, while domestic demand recovery remains insufficient. Consequently, cotton prices are expected to extend their downward trajectory in the near term.
Data shows that as of September 17th, the national average price for grade 3128B lint cotton stood at 16,930 yuan per ton, marking a cumulative decline of 758 yuan per ton, or 4.29% for the month. This price slide is primarily driven by four key factors: a notable slowdown in expectations for global cotton production cuts; the underwhelming performance of the "Golden September" traditional peak season leading to deteriorating demand; the dual supply pressure from ongoing reserve cotton auctions and the imminent arrival of new crop cotton; and the unsettling influence of anticipated US interest rate hikes.
Production Cut Expectations Diminish
Entering September, cotton bolls in major domestic growing regions have matured, with the boll-opening rate climbing and harvest progress steadily advancing. The marginal impact of weather on output has significantly lessened, especially since a large portion of the production cut expectations had already been factored into prices back in August. Additionally, the USDA's September global supply-demand report showed that the downward revision for US cotton production was far less aggressive than the market had optimistically anticipated. Since the start of September, international cotton prices have dropped noticeably, which directly dampened domestic market sentiment and pulled domestic physical cotton prices down concurrently.
"Golden September" Falls Short, Demand Deteriorates
The traditional bulk orders for autumn and winter have yet to enter their concentrated release phase. Even as the peak season arrives, the sustained decline in raw cotton prices has made downstream entities—from garment makers to fabric mills—cautious about placing orders for the winter and spring seasons. They are sticking to short-term, small-volume orders, with some end-users and downstream companies even choosing to wait on the sidelines. Despite spinning mills maintaining high operating rates, finished cotton yarn inventories continue to accumulate. In a rare move for the peak season, some smaller mills have resorted to output cuts to alleviate inventory pressure. Monitoring data reveals that in the week ending September 17th, cotton yarn inventory days at Shandong textile enterprises rose to 34, an increase of 3 days compared to the end of the previous month.
Dual Supply Pressure: Reserve Auctions and New Crop Arrival
The continuous release of reserve cotton, with a high transaction rate, is steadily supplying the market. From July 20th to September 17th, cumulative transactions reached 350,200 tons. At the same time, the large-scale boll opening in Xinjiang’s cotton fields in September signals that the new crop will soon be harvested and traded on a massive scale. This has amplified the hedging pressure on ginning factories, with the market pre-emptively factoring in the supply increase from the new crop. As the focus of the global cotton market shifts toward the "actual increase in supply," this is exerting substantial downward pressure on prices.
With the official transition into the 2026/27 cotton marketing year, the market's core pricing logic and drivers have fundamentally changed. For the fourth quarter, several key variables deserve close attention. On the supply side, despite lingering uncertainties regarding the impact of earlier abnormal weather on yields in US and Xinjiang cotton, the imminent large-scale harvesting of the new crop will escalate supply pressure. The market's focus has now turned to tangible supply growth, considerably easing concerns about weather-related production losses. This, combined with the ongoing reserve auctions and an unclear October sales policy, will continue to cap any upside potential for cotton prices.
On the demand side, the lackluster "Golden September" has shown no signs of significant improvement. Looking forward, as temperatures drop, the previously delayed autumn and winter orders are expected to gradually return, which could slowly release some rigid purchasing demand for raw cotton. On the sentiment front, the negotiation between domestic cotton farmers and downstream ginning enterprises is becoming increasingly intense. Farmers, buoyed by expectations of reduced output and significantly higher planting costs, hold strong psychological support for higher opening prices for new seed cotton. Conversely, ginning companies, citing the concentrated supply of new cotton, weaker downstream terminal demand, and their own cost management needs, are inclined to keep purchase prices low.
In summary, the reduction in weather-related disruptions and the pricing-in of production cut expectations are weakening the bullish factors for cotton. As the new crop enters the market, supply-side pressure mounts, while domestic demand recovery lags. The short-term outlook for cotton prices remains pessimistic. However, strong price support from farmers and expectations of reduced supply in the new marketing year may limit the extent of the decline. Ultimately, the medium-to-long-term price trend will likely hinge on the actual output of Xinjiang cotton and the downstream demand performance during the fourth quarter.