【Wdoodoo Weekly Cotton Report】The marginal bullish momentum weakens, and Zhengzhou cotton enters a phased consolidation.

May 12, 2026, 3:00 PM

WDD-Global

208

Guide

Highlights at a glance

Last week, Zhengzhou cotton surged then retreated amid rising state reserves auction rumors and mixed supply-demand signals. While macro support remains bullish—driven by US-Iran tensions, elevated chemical fiber costs, and improving China-US relations—fundamentals show easing pressure: US drought slightly improved, Xinjiang planting decline was smaller than expected, and commercial cotton inventory hit 4.32 million tons (up YoY). Global output is forecast at 25.9M tons for 2026/27 (+0.3% YoY), with China’s output projected above 7M tons. Demand remains resilient but off-season weakness looms—yarn mill operating rates dipped, inventories rose, and soaring cotton/yarn imports contrast sharply with sluggish textile exports (+1.2% YoY). Price action suggests a shift to range-bound trading (support: 15,800–16,000; resistance: 17,000 yuan/ton); profits should be taken on rallies. Medium-term upside remains possible pending El Niño developments and actual reserve releases.

Last week, Zhengzhou cotton surged sharply then retreated. CF09 closed at 16,310 yuan per ton, down 245 yuan per ton week on week; Cotton 3128B closed at 17,525 yuan per ton, down 40 yuan per ton week on week. Reserves auction rumors escalated. Entering May, attention should be paid to the actual Sino-US sowing progress and off-season demand performance, and the market may require new bullish catalysts.

1. Bullish macro support remains

The US-Iran situation remains volatile with negotiations and conflicts unfolding simultaneously. Chemical fiber raw material costs stay elevated, providing bullish substitution support for cotton demand. Frequent high-level interactions between China and the US recently pave the way for a leaders’ meeting. Overall, the macro environment offers positive support to cotton prices.

2. US drought eases slightly; Xinjiang cotton planting decline below expectations

Growing-region weather is the core driver for overseas cotton markets. Rainfall has occurred in parts of US cotton producing areas, while overall drought persists. Commercial spot fixing buying on dips continues to underpin ICE cotton futures. Focus is on the USDA May monthly supply and demand forecast for US output in the 2026/27 season.

The International Cotton Advisory Committee (ICAC) May 2026 report estimated global cotton output at 25.9 million tons for 2026/27, a year-on-year increase of 0.3%.

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Domestic cotton sowing is basically completed. China’s 2026 cotton planting area is estimated at 43.06 million mu, down 3.9% year on year, with output expected to exceed 7 million tons. The scale of output reduction is slightly lower than market expectations.

3. Reserves auction rumors heat up; commercial cotton inventory remains ample

Market rumors suggest state cotton reserves will be released from May 18 to August 31. The rumored auction volume has gradually risen from 300,000 tons to 500,000–700,000 tons, with some rumors indicating unlimited volume to be released flexibly based on market conditions.

According to BCO data, as of late April, national commercial cotton inventory stood at 4.3207 million tons, down 589,000 tons month on week and up 168,100 tons year on year. The year-on-year increment of commercial cotton inventory expanded further, shaking market expectations of a tight supply-demand balance this season.

4. Demand still underpins prices while terminal concerns build

Off-season characteristics are becoming increasingly evident. Last week, the comprehensive operating rate of yarn mills and pure cotton grey fabric operating rate edged down, with pure cotton yarn and grey fabric inventories posting slight sequential gains. Nevertheless, overall cotton consumption remains high amid high production capacity, and finished goods inventory is generally low, with no immediate bearish pressure from the demand side.

With cotton prices rallying strongly, yarn mill spinning margins remain under pressure, and raw material purchasing sentiment has weakened markedly. Current partial yarn orders stem from speculative demand by traders. As the traditional May–June off-season approaches, accumulating negative factors on the demand side merit close attention.

China’s cumulative imports of cotton and cotton yarn both exceeded 500,000 tons in January–March, surging over 50% year on year. By contrast, cumulative textile and apparel exports reached 67.08 billion US dollars in the first quarter, up merely around 1.2% year on year. The sharp divergence between surging cotton & yarn imports and sluggish textile exports calls for vigilance on off-season textile demand changes.

Overall Market Outlook，Rising reserves auction expectations, marginal easing of US drought, and smaller-than-expected reduction in Xinjiang cotton planting are weighing on sentiment. As the off-season arrives, bearish demand factors are building, and the definitive uptrend phase may have ended. Zhengzhou cotton has shifted from a trending market to range-bound consolidation, with key support at 15,800–16,000 yuan/ton and resistance at 17,000 yuan/ton. We maintain the view of taking profits on rallies.

In the medium to long term, El Niño market speculation remains active. Domestic confirmed output reduction and official reserves auction are yet to be implemented, leaving room for further upside in cotton prices. We do not advocate excessive bearish bets; prefer to go long on price corrections.