【Wdoodoo Weekly Cotton Report】Bullish speculation fades, Zhengzhou cotton continues to consolidate

May 19, 2026, 10:59 AM

WDD-Global

191

Guide

Highlights at a glance

Last week, domestic and overseas cotton prices retreated amid fading bullish sentiment, rising macro risks (including Fed tightening expectations and China’s anti-fraud crackdown), state reserve auctions, and off-season demand softness. Zhengzhou cotton futures consolidated sideways, supported by long-term supply concerns—USDA forecasts a 1.44M-ton global output drop in 2026/27 and shrinking ending stocks—while near-term pressures stem from improved US drought conditions and milder-than-expected Xinjiang planting cuts. Reserve release rumors (May–August, scaling to 500K–700K tons) aim to stabilize prices rather than flood the market. Demand remains resilient for now, with spinning mills actively buying dips, though downstream yarn and fabric inventories are rising. Key near-term range: 15,800–17,000 yuan/ton; long-term bias remains bullish on El Niño risks and structural supply tightness.

Domestic and overseas cotton prices fluctuated and retreated last week. The closing price of CF09 stood at 16,085 yuan per ton, down 225 yuan per ton week-on-week; the closing price of Cotton 3128B was 17,275 yuan per ton, down 250 yuan per ton. As bullish speculation subsides and macro risks rise, coupled with state cotton reserve auctions and off-season factors, Zhengzhou cotton futures remain in phased consolidation.

1. Shift of core driving factors, commodity indices turn range-bound

Fluctuating US-Iran relations feature alternating negotiations and conflicts, with no substantial settlement expected in the short term. High chemical fiber raw material costs support cotton substitution demand.

Commodity markets have digested most Middle East risks. US inflation rebounded beyond expectations, and the upcoming inauguration of new Fed Chair Kevin Walsh has revived monetary tightening expectations. China’s strict crackdown on false invoicing has disturbed domestic commodity liquidity. Bulk commodity indexes have shifted from trending to range-bound movement.

2. Bullish USDA report underpins cotton prices on long-term supply shrinkage

The May USDA report indicated that global cotton output in 2026/27 will drop by 1.436 million tons year-on-year with output cuts across major producing countries. Global consumption will rise by 339,000 tons, and ending stocks will slump by 1.181 million tons. As Northern Hemisphere cotton is still in sowing and growing periods, possible El Niño brings supply uncertainties. Global cotton prices remain bullish-biased in the medium and long run.

3. Mild relief in US drought and lower-than-expected Xinjiang planting cuts weigh on short-term market

Drought in key US cotton regions improved month on month. Texas drought index dropped 10 points to 205, erasing weather premium, yet still 43 points higher than a year ago, keeping drought impacts intact.

Domestic cotton sowing is completed. China’s 2026 cotton planting area is estimated at 43.06 million mu, down 3.9% year-on-year with output above 7 million tons, and the production decline is slightly below market expectations.

4. Focus on state reserve cotton release rhythm

Market rumors point to reserve cotton release from late May to late August, with volume rising gradually from 300,000 tons to 500,000-700,000 tons adjusted by market conditions.

We believe such news mainly hedges near-month short squeeze risks. Current commercial and port cotton inventories are sufficient; policy signal release rather than immediate stock dumping is more conducive to price stability.

5. Demand stays supportive amid growing downstream worries

Off-season effects are emerging. Since May, yarn and pure cotton grey fabric operating rates have declined continuously, while pure cotton yarn and staple fabric inventories kept rising month on month. Finished goods inventories remain low, spinning mill operating rates stay stable with strong cotton consumption. Spinning enterprises actively purchase on dips between 15,800-16,200 yuan/ton, with no obvious bearish pressure from demand side.

Heightened Fed tightening expectations, faded US weather premium and insufficient Xinjiang production cuts have fully priced in bullish factors. As the off-season arrives, the definitive trending phase has ended. Zheng cotton moves sideways, with key support at 15,800-16,000 and resistance at 17,000. Hedge or take profits at rebound highs.

In the long run, El Niño speculation, confirmed domestic production reduction and pending reserve cotton policies leave upward room for cotton prices. Avoid excessive bearish views; go long on corrections with weekly support at 15,500.

Weekly Monitoring Focus

1.Sustained momentum of Middle East geopolitical conflicts

2.Evolution of drought conditions in the United States

3.Actual performance of terminal market demand

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