China Cotton Under Pressure as Inventories Surge and Mills Cut Back

China’s cotton market remains under clear downward pressure, with October 2026 marked by rising commercial inventories, soft textile demand and only limited support from higher seed cotton procurement costs. Futures have eased alongside spot values, and without a visible recovery in yarn orders, prices are likely to stay capped in the short term. After a brief firming in early harvest, China’s cotton complex has shifted decisively into a supply-heavy phase. Rapid progress in Xinjiang’s picking and ginning has pushed commercial inventories sharply higher, while spinning and weaving mills are running well below normal, limiting offtake. Although seed cotton prices remain significantly above last year, this strength mainly squeezes ginners’ margins rather than supporting lint values. Nearby Zhengzhou cotton futures are drifting lower but not collapsing, suggesting the market is waiting for clearer signals from downstream demand and policy rather than fearing an immediate supply shock.

Prices & Futures

Spot prices for 3128B-grade cotton lint in China slipped to about 16,845 yuan/tonne on 29 October, down around 3.2% from the beginning of the month as heavier supplies met weak buying interest. January cotton futures on the Zhengzhou Commodity Exchange mirrored this pressure, falling roughly 3.8% over October to about 15,170 yuan/tonne, underlining a softening but still orderly market structure.

Recent quotes indicate that nearby Zhengzhou contracts have continued to trade slightly below late‑October levels, consolidating around the high‑14,000s to low‑15,000s yuan/tonne with modest daily declines. The relatively narrow move suggests that, despite higher inventories, participants currently expect range‑bound trading rather than a sharp breakdown.

Supply, Inventories & Weather

China’s commercial cotton stocks have increased rapidly as new crop supplies arrive. Inventories rose from about 1.77 million tonnes at end‑September to 2.61 million tonnes by 15 October, and then to roughly 2.91 million tonnes by 23 October. Xinjiang, the dominant producing region, accounts for the bulk of these stocks as rapid harvesting and ginning boost the flow of lint into warehouses.

Harvest progress is well advanced: by 22 October, around 80.1% of China’s cotton crop had been harvested, with processing ahead of last year’s pace. Regional reports indicate that cotton picking progress in Xinjiang has now exceeded 90%, supported by broadly favorable weather conditions for late‑season field work and drying. With most of the crop already collected and no major weather threat, near‑term supply risk is low while inventory pressure remains high.

Costs, Mills & Demand

Despite weaker lint prices, seed cotton procurement remains elevated. In Xinjiang, machine‑harvested seed cotton averaged about 7.33 yuan/kg during 19–25 October, roughly 16.7% higher than a year earlier. This divergence between firm raw cotton costs and softer lint prices is eroding ginning margins, as processors struggle to pass higher input costs downstream into a weak market.

Textile demand remains the main drag. By late October, spinning mills were operating at about 69% of capacity, while weaving mills were at only 35%, reflecting disappointing peak‑season orders, falling yarn prices and financial losses in many plants. Industrial cotton inventories at textile enterprises reached roughly 831,900 tonnes by mid‑October, and cautious procurement behavior has left the surge in commercial stocks largely unabsorbed. Without a clear improvement in export orders or domestic consumption, mills are unlikely to step up buying aggressively.

Outlook & Trading View

Analysts currently expect Chinese cotton futures to remain in a relatively narrow band in the near term, with sizeable inventories and subdued mill demand offsetting support from higher seed cotton costs and any marginally tighter production outlook. A more durable price recovery would require stronger yarn orders, higher spinning and weaving operating rates, and a visible drawdown in commercial stocks rather than further accumulation.

• Producers / Ginners: Consider hedging a portion of unsold lint on rallies, given margin pressure from high seed cotton costs and soft downstream demand.
• Spinners: Maintain cautious raw cotton coverage, adding selectively on price dips while monitoring yarn order books and inventory levels.
• Traders / Investors: Expect range‑bound futures with a mild downside bias; short‑term strategies may favor selling rallies near recent highs rather than chasing further declines.

Over the next three trading days, Zhengzhou cotton futures are likely to remain under modest downward pressure but within recent ranges, with abundant nearby supply and weak mill demand limiting upside toward mid‑October levels.