Australian Cotton Market Faces Firm Prices as Buyers Delay Purchasing
Strong grower selling, limited export demand and upcoming India and China buying windows shape the market outlook
The Australian cotton market entered August with cash values remaining firm while export demand stayed limited. Australian cash values traded largely in the A$605–615/bale range through July before moving slightly higher towards the end of the month, while export enquiry remained subdued.
The market is also being influenced by Australian crop progress, India’s temporary removal of cotton import duties, China’s strategic reserve auctions and the direction of ICE Cotton Futures.
Australian cotton crop reaches 66% classed
The 2026 Australian cotton season continues to progress, with ginning estimated to be 76% complete. Some gins have already completed operations, while others are expected to finish by the end of August or early September.
Close to 3 million bales, representing 66% of a 4.5 million bale crop, have now been classed. Quality has remained strong, although some Middling (31) and Strict Low Middling (41) grades have started appearing in later cotton.
Around 90% of the crop remains at SM (21) colour and better.
June exports reach 566,000 bales
Australian cotton exports increased in June, with 566,000 bales shipped during the month, broadly in line with the same period last year.
China was the leading destination, accounting for 53% of June exports, followed by:
- Vietnam: 19%
- Malaysia: 9%
- India: 5%
- Indonesia: 5%
- Bangladesh: 4%
The balance of the 2026 crop remains a key market question as nearby demand has been relatively slow.
India import window creates near-term opportunity
India temporarily exempted cotton imports from the 11% basic customs duty and agriculture cess from 1 June to 31 October.
Australian cotton broadly needs to leave the country by early September to arrive within this duty-free window. This timing coincides with the seasonal reduction in Australian ginning capacity through August and September.
India's cotton balance sheet is currently in deficit, with tighter conditions expected in September and October. The monsoon is running at a meaningful shortfall, while El Niño is pointing towards a drier finish.
Australia also has a separate trade advantage after the general exemption ends. Under the Australia–India Economic Cooperation and Trade Agreement, 51,000 tonnes can enter India at zero duty each year.
Historically, this allocation is filled. Exporters who fail to use 90% of their entitlement face a one-for-one debit against the following year's quota allocation.
China remains focused on strategic reserves
China continues to provide another potential demand window. Strategic reserve auctions have cleared 100% of every session at solid prices and are expected to continue until around the end of September.
This has kept China largely out of the import market for the time being. Replenishment of the reserves could provide a future source of demand, although the timing remains uncertain.
President Xi visits the United States on 24 September, and the market expects the timing of any significant Chinese import decision to remain linked to developments around that period.
Global cotton balance shifts towards deficit
The global cotton market is moving into a season where production and consumption are expected to be in deficit following several years of surplus.
While crude oil prices and Middle East developments have contributed to market volatility, the underlying change in the global cotton balance remains a key factor.
China's strategic reserve auctions, where every session has cleared at 100%, indicate continued movement of cotton from official reserves into consumption.
Buyers remain cautious despite firm prices
Australian growers are reported to be close to 90% sold on the 2026 crop, with grower selling slowing considerably. The cotton already sold has moved into the trade, leaving merchants holding basis positions across different growths.
December Futures remained within a 78–82 cents/lb range for most of July. Mill buying has weakened when December Futures move above the 80 cents/lb level and tends to improve below 78 cents/lb.
This has created a market where sellers are willing to offer cotton at firm prices while buyers remain cautious.
Most buyers across destinations are continuing to hold minimum inventories and purchase primarily for nearby shipment, although some larger mills have covered three to four months ahead.
Market outlook
The current market situation is being shaped less by a lack of cotton and more by the timing of demand.
India could provide additional demand around the current duty-free import period and again through the ECTA quota after 31 October, while China could return to the market once strategic reserve replenishment begins.
For Australian cotton held by the trade, the coming four to eight weeks will therefore be important as sellers and buyers attempt to bridge the gap between firm supply-side pricing and delayed demand.