Tight Supply and Demand Support Cotton Prices, Strong Synchronous Rally at Home and Abroad

February 28, 2026, 7:52 PM

WDD-Global

Guide

Highlights at a glance

Global cotton markets face tightening supply-demand dynamics amid production cuts in the U.S. and Brazil, rising El Niño risks, and recovering end-demand—evident in surging apparel sales, EU confidence gains, and Vietnamese order backlogs. Prices rallied synchronously: ICE futures rose 2.96%, Zhengzhou futures jumped over 600 yuan/tonne, and the domestic-foreign price gap hit a 10-year high of 3,844 yuan/tonne. China’s market is propelled by policy support (continued target price reform, Xinjiang planting cuts >10%), strong domestic sales (69.5% rate), and downstream复工—textile operating rates at 88.2%. Yet import dependency is set to rise 25%, clashing with global supply constraints and evolving U.S.-Bangladesh-India tariff arrangements. Short-term strength looms for “Golden March, Silver April,” but import delays and soft order absorption pose near-term risks.

Expectations of a tightening global cotton supply and demand have intensified, with frequent policy signals and a linked rise in domestic and foreign cotton prices. Supported by policy backing, supply contraction and downstream resumption of work, China's cotton market has maintained a strong performance, while facing opportunities and challenges from the restructuring of the international trade pattern. The core contradiction in this period is the divergence between expected global cotton production cuts and the momentum of demand recovery, with China’s market dynamics profoundly shaping the global landscape.

I. Global Cotton Market: Tight Supply and Demand, Rising Prices

In this period, expectations of a tight global cotton supply-demand balance for the 2026/27 new season have strengthened. Coupled with policy adjustments and demand recovery, domestic and foreign cotton prices have risen in tandem, and market sentiment has improved.

(I) Supply Side: Clear Production Cut Signals, Lingering Uncertainties

Major global cotton producers have signaled clear production reductions:

The United States plans to plant 9 million acres of cotton, down 3.2% year-on-year, with total output for the 2026/27 season expected to fall 2.3% to 2.96 million tonnes. Brazil is projected to cut production by 283,000 tonnes to 3.81 million tonnes, exacerbating supply tightness.

In addition, the weak La Niña is fading globally, and the probability of El Niño in the second half of the year is relatively high; extreme weather could further disrupt planting and growth in major producing regions.

(II) Demand Side: Consumption Recovery, Restructuring Trade Patterns

A recovery in global end-demand has emerged:

U.S. apparel and clothing sales in January rose 9.39% year-on-year, the EU consumer confidence index rebounded, textile exports in Southeast Asia recovered, and orders at major Vietnamese enterprises are scheduled through the end of the second quarter, indirectly boosting cotton demand.

On trade policy:

The U.S. ruled the “IEEPA tariffs” illegal, reducing China’s export tariffs to the U.S. to 24%. However, the U.S. plans to impose additional tariffs on goods imported globally, while reciprocal tariff agreements with Bangladesh and India will reshape textile trade and the regional distribution of cotton demand.

(III) Price Performance: Synchronous Rally at Home and Abroad, Historic Price Gap

The front-month ICE cotton futures stood at 65.36 cents/lb, up 2.96% from the end of last month.

The International Cotton Index (M) converted to RMB import cost was 12,739 yuan/tonne, up 2.29%.

Zhengzhou cotton front-month futures rose more than 600 yuan/tonne cumulatively.

The domestic and foreign cotton price spread reached 3,844 yuan/tonne, a 10-year high, strengthening domestic enterprises’ willingness to purchase foreign cotton.

II. China’s Cotton Market: Policy Backing, Tight Supply and Demand

During this period, China’s cotton market featured “policy backing, tight supply, and demand recovery”, with improved market confidence and strong cotton price fluctuations.

(I) Policy: Continued Target Price, Reduced Planting Area

The 2026 Central Government No.1 Document clearly aims to improve the cotton target price policy, expected to continue the “price-subsidy separation” framework and deepen the “target price + insurance + futures” mechanism.

As the main production region, Xinjiang’s cotton planting area will be reduced by more than 10%, and may exceed 15% under extreme weather, tightening supply in the short term and improving industrial efficiency in the long run.

(II) Supply and Demand: Smooth Sales in the Current Year, Supply Pressure in the New Season

The national cotton sales rate reached 69.5%, with sales volume of 5.15 million tonnes, an increase of 1.85 million tonnes year-on-year, and public inspection volume up 14.3% year-on-year, indicating steady demand.

For the new season, affected by the reduced planting area in Xinjiang, China’s cotton import demand is expected to rise 25% to 1.524 million tonnes, but tight global supply and trade uncertainty may affect the arrival pace.

(III) Downstream Demand: Resumption of Production, Upcoming Peak Season

Textile industry resumption accelerated after the Spring Festival.

The national operating rate of textile enterprises reached 88.2%, up 1.3 percentage points month-on-month. Industrial inventories rose for 4 consecutive months, while yarn and fabric inventories fell, showing a clear production recovery.

However, rising cotton prices led some enterprises to raise cotton yarn quotations with limited market acceptance, and the actual release of end-consumption remains to be observed.

III. Period Summary and Outlook

In this period, the global cotton supply-demand structure has been reshaped, with production cuts and demand recovery driving prices higher. Supported by multiple positives, China’s market has performed strongly while facing import and trade challenges.

In the short term, the expected “Golden March, Silver April” peak season and external market linkage will support strong cotton prices, but risks including import substitution and weaker-than-expected orders require caution.

In the medium to long term, the global cotton market will enter a tight balance. Reduced planting area in Xinjiang and expanding domestic demand will underpin a higher cotton price center. Continued attention should be paid to trade policies, the global economy, and weather conditions in major producing countries.

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