【Wdoodoo Weekly Cotton Report】There is a risk of a downturn in recent months, and attention should be paid to whether the demand side is taking over

This week, the cotton range is consolidating at a high level, completing the main monthly shift. CF01 closed at 16740 yuan/ton, up 90 yuan/ton month on month; National cotton 3128B closed at 17545 yuan/ton, a month on month decrease of 25 yuan/ton. High temperature and drought weather continue to support cotton prices, but off-season demand suppresses upward potential.

1. Macro support tends to be bullish.
The marginal decline in US inflation coupled with weakened consumption has led to a decrease in expectations of a September interest rate hike, providing more support for commodities. But energy brings uncertainty. The temporary memorandum of understanding between the United States and Iran expires on August 17th, and there has been no substantial breakthrough in the current negotiations, resulting in fluctuating shipping risks in the Strait of Hormuz.
2. The USDA report is slightly bullish, with continued weather surges.
The USDA August supply and demand report meets market expectations. The global cotton production for 2026/27 has been increased to 25.612 million tons, and consumption has been raised to 26.763 million tons. Coupled with a decline in initial inventory, the global ending inventory has dropped to 15.172 million tons, a decrease of 335000 tons compared to the previous period. The inventory level has fallen back to the low level since 2011/12, and the global supply-demand tight balance pattern has been established.
The weather continues to ferment with favorable conditions. The drought situation in Texas has intensified month on month, with the cotton yield rate in the main production areas dropping to 40%, a significant year-on-year decline, and the seedling situation continuing to deteriorate; The main production areas in India have relatively low rainfall, and there is uncertainty in the sowing and growth of new cotton. Multiple weather disturbances support the price of outer cotton. At the same time, Brazil's new cotton production has slightly decreased and exports have increased, further optimizing the global supply and demand structure.
3. The policy of selling inventory continues to exert pressure.
From August 10th to August 14th, a total of 40100 tons of reserve cotton resources were sold, with a total transaction volume of 40100 tons and a transaction rate of 100%. The average transaction price is 17178 yuan/ton, with a discount of 3128 yuan/ton and an average markup of 17828 yuan/ton.
Cotton rotation continues to increase market supply. Based on the current daily listing volume of 8000 tons of reserve cotton, a total of 420000 tons have been listed as of September 30th. The reserve cotton wheel effectively supplements the gap of old crops, alleviates the expectation of tight supply-demand balance, and puts pressure on cotton prices.
3. The demand side has not significantly improved.
The overall demand side is in the traditional off-season, with textile and fabric factories maintaining stable and weak start-up loads. Yarn factories have slightly reduced their inventory, but fabric factories continue to accumulate inventory, and terminal orders have not yet been released in a concentrated manner. The weak recovery of domestic demand has become the core factor restricting the rise of Zhengzhou cotton. However, the market has expectations for the issuance of autumn and winter orders by the end of August, providing bottom support for the market.

Overall, the short-term cotton price long short game has intensified, with favorable weather conditions offsetting weak demand and inventory selling. Zhengmian 01 is expected to fluctuate within the range of 16500-17200 yuan/ton, and high prices need to be alert to the risk of a pullback after weather speculation cools down, and pay attention to whether the demand side in the peak season will relay. In the medium to long term, the global cotton supply and demand pattern in the new year is turning tighter, and there is still speculation of a rise in cotton prices under the background of El Ni ñ o. Maintain a neutral and bullish mindset in operations, rush high and reduce positions, and lay out long-term long orders on dips. Focus on tracking weather changes in major global production areas and the landing pace of domestic autumn and winter orders in the future.