After the May Day holiday, Zhengzhou Cotton futures experienced a brief but sharp sentiment shift. The main contract briefly tested the 17,000 yuan/ton threshold but failed to hold, then reversed downward, accumulating a drop of over 600 points by May 11. Market funds significantly reduced long positions, trading activity contracted, and a short-term weak adjustment pattern has been established.
This surge and pullback, while appearing technical, reflects the release of multiple bearish factors. The textile industry has officially exited the traditional peak season of 'golden March and silver April' and entered seasonal demand weakness, with sluggish terminal orders becoming the core factor suppressing cotton prices. Current order distribution shows clear structural divergence: only high-count compact and combed 40S yarn orders extend to July-August, while most regular count yarn varieties face weak order follow-up, with spot supply gradually loosening and inventories slowly accumulating. On pricing, high-count 40S yarn maintains stable pricing due to firm orders, but regular varieties have seen price cuts of 100-200 yuan/ton, with expanding negotiation room.
Industry Impact: Negative Feedback Loop from Upstream to Downstream
The grey fabric market shows an even more pronounced downturn. Weak terminal demand transmission to weaving has led to declining operating rates. In core weaving areas like Foshan, circular knitting machine utilization has dropped to 40%, sharply down from peak season. New order placements are insufficient, old orders are winding down, and the industry faces a 'gap between orders.' Weak consumption in downstream apparel and home textiles increases destocking pressure, further contracting demand for upstream cotton raw materials, forming a negative feedback loop of 'futures decline - spot decline - terminal wait-and-see - weaker demand,' continuously suppressing cotton price rebound potential.
The spot market is also under pressure. Domestic commercial cotton inventories continue to decline, at relatively low levels for the year. High-quality Xinjiang double-29 grade cotton with impurity below 3% shows scarcity, with basis stabilizing at 1,200 yuan/ton. However, terminal procurement demand has not followed, with downstream spinners adhering to a 'buy-as-needed' principle, only maintaining daily replenishment. Large-scale stockpiling willingness is generally weak. Pre-season inventories have been largely consumed, and off-season demand expectations suppress restocking confidence, compounded by limited profit margins for textile enterprises.
Macro and Policy: Stacking Uncertainties
Beyond weak fundamentals, multiple uncertainties have intensified Zheng Cotton futures volatility. U.S. President Trump's upcoming visit to China may disturb overall commodity market sentiment, with cotton likely to fluctuate with macro sentiment in the short term. Simultaneously, persistent market rumors of reserve cotton release have become a key bearish factor. Against the backdrop of weak off-season demand, the expected release exacerbates supply glut concerns. Combined with elevated valuations after the earlier price surge, risk aversion has prompted long position liquidation, accelerating the short-term correction.
Medium-to-Long Term Logic: Supply Gap Supports Valuation
Despite short-term pressure, medium-term support remains solid. Domestic commercial cotton inventories are low, and the annual reduction in Xinjiang cotton planting area is confirmed, with the industry expecting a 3%-5% year-on-year production decline. The annual supply-demand gap persists, with limited supplementary imports, leaving the overall tight balance unchanged. As the traditional textile consumption season approaches in the second half of the year, terminal demand is expected to gradually recover, providing valuation repair room for cotton prices after the correction. The short-term core trading range is estimated at 16,000-16,800 yuan/ton, with strong resistance above.