【Wdoodoo Cotton Monthly Report】Frequent Macro Events, Zheng Cotton Rallies and Consolidates

March 3, 2026, 4:24 PM

WDD-Global

Guide

Highlights at a glance

Zheng Cotton surged last week amid USDA report optimism and holiday tariff benefits, with CF05 hitting 15,665 yuan/ton—but retreated into consolidation after short-term bullishness faded, marked by a long upper shadow. While Middle East tensions (e.g., Iran’s Hormuz blockade) are boosting safe-haven and energy commodities, cotton faces only indirect spillover effects. Fundamentally, tightening global supply—USDA forecasts a 3.2% YoY drop in 26/27 production and 5.2% lower ending stocks—plus reduced Xinjiang planting area and strong local spinning demand underpin long-term support. However, record domestic-foreign cotton price spreads (5-year high) and sluggish downstream demand—weak yarn order acceptance, cautious fabric mills, and elevated inventories—constrain near-term upside. Price consolidation is expected between 15,000–15,665 yuan/ton; medium-to-long-term bias remains moderately bullish on dips. Key watchpoints: Middle East conflict sustainability, Xinjiang planting policies, and terminal demand recovery.

Affected by the US Department of Agriculture report and tariff benefits during the holiday, Zheng Cotton surged sharply along with US Cotton last week.CF05 hit a high of 15,665 yuan/ton, and Cotton 3128B reached a maximum of 16,505 yuan/ton.However, after short-term positive factors were digested, Zheng Cotton futures closed with a huge long upper shadow on Thursday and entered a shock adjustment phase again.

1.Intensified macro volatility and sharp fluctuations in risky assets

Geopolitical conflicts in the Middle East escalated over the weekend, with Iran beginning to block the Strait of Hormuz.The current intensity exceeds expectations, and short-term pushes on prices of precious metals, energy and chemical commodities are expected.Attention will be paid to the sustainability of the incident.Judging from various feedbacks, we currently lean toward a pulse-like upward market.Cotton is mainly affected indirectly, and the judgment of buying on dips remains unchanged.

2.Expectations of reduced supply in the new crop year provide long-term support for cotton prices

According to the latest forecast from the USDA Agricultural Outlook Forum, in the 26/27 season, global cotton production is expected to decrease by 3.2% year-on-year, consumption to increase by 1.2% year-on-year, and ending stocks to decrease by 5.2% year-on-year.

A definite reduction in cotton planting area in Xinjiang is expected in the new season, and positive planting policies are difficult to disprove before the sowing period.Demand has increased significantly amid capacity expansion of Xinjiang spinning mills, and coupled with low carry-over stocks from last year, spot supply will remain tight this year.Current commercial stocks have started to fall after peaking.

However, the current spot price spread between domestic and foreign cotton (converted at 1%) remains at a five-year high.Concerns over expected import growth may impose periodic pressure on Zheng Cotton.

3.Demand side affects the pace of cotton price increases

As textile enterprises had built up sufficient inventories in the early stage, cotton spot trading was muted after the holiday.Yarn factories have resumed work relatively quickly, with Xinjiang textile enterprises basically back to full operation.Driven by the sharp rise in cotton prices, yarn mills continuously raised cotton yarn quotations after the holiday, but market acceptance was weak, leading to a slight increase in cotton yarn inventories at textile enterprises during the week.Fabric mills remained quiet and have not fully resumed production, holding relatively cautious expectations for the traditional peak season of "Golden March and Silver April".Most downstream players are in the inquiry stage, with few new orders placed.

Overall, terminal demand remains relatively cautious, and the price gap between domestic and foreign cotton has continued to widen to a five-year high. After short-term bullish factors are digested, cotton prices may undergo a correction and consolidation.However, supported by rigid demand from Xinjiang spinning mills, positive policies on Xinjiang cotton planting are hard to disprove before the sowing season. The USDA report indicates a tight supply-demand balance in the new year, which underpins cotton prices in the long run.Zheng Cotton is expected to consolidate at high levels between 15,000 and 15,665. Long positions may be reduced appropriately on rallies, while a moderately bullish view on dips is still preferred in the medium and long term.

Focus this week: