【Wdoodoo Weekly Cotton Report】Domestic and overseas cotton markets retreat in tandem: correction or trend reversal?

Domestic and overseas cotton markets continued to fluctuate lower last week. The closing price of CF09 stood at 15,895 yuan per ton, down 190 yuan per ton week-on-week. Cotton 3128B closed at 17,080 yuan per ton, falling 195 yuan per ton from the previous period. Risks of interest rate hikes in the US have risen, while weather-related speculation has cooled. Combined with the domestic off-season and rumors of state cotton reserves release, long funds kept exiting the market.

1. Commodity index moves into sideways trend

Geopolitical tensions in the Middle East remain volatile amid ongoing negotiations and conflicts. Reports indicate the two parties are close to signing a ceasefire memorandum, which led to a pullback in the energy and chemical sector last week. Growing hawkish voices within the Federal Reserve and the likely rate hike by the European Central Bank have pushed the commodity index from an uptrend into consolidation.

2. Reduced supply in the new season continues to underpin cotton prices in the long run

According to the May report from the United States Department of Agriculture (USDA), global cotton output for the 2026/27 season will drop by 1.436 million tons year-on-year, while ending stocks will see a sharp decrease of 1.181 million tons. The Northern Hemisphere is now in the planting and growing season. A rising probability of El Niño has introduced uncertainties to supply. In the medium to long term, global cotton prices are expected to remain bullish.

3. Marginal improvement in US drought and rumors of reserve sales weigh on short-term cotton prices

4. Off-season characteristics emerge, while rigid demand offers certain support

In May, the overall operating rate of yarn production and pure cotton grey fabric output have declined continuously. Inventories of pure cotton yarn and short fiber fabrics kept rising week-on-week. Nevertheless, finished goods inventories are still relatively low on the whole, and textile mills maintain steady operating rates with robust cotton consumption. A large number of buying orders appeared in the range of 15,800 to 16,200 yuan per ton, meaning demand has not become a major negative factor for the time being.

Weekly Focus
      1.Developments of geopolitical conflicts in the Middle East
      2.Drought conditions in the United States
      3.Performance of end-user demand