Core Viewpoint - The article discusses the current state and future prospects of cotton planting in Xinjiang, highlighting the positive impact of government policies and the proactive measures taken by farmers and companies in the cotton industry [1][2][3]. Group 1: Government Policies and Industry Outlook - The central government's policy emphasizes the stable development of the cotton industry, including optimizing production layout and variety structure in Xinjiang, which boosts farmers' confidence and planting enthusiasm [1][2]. - The Xinjiang government aims to stabilize cotton production at around 5.6 million tons this year, although a reduction in planting area is anticipated due to structural adjustments in agriculture [2][3]. - The cotton planting area in Xinjiang has historically shown a stable increase, but recent adjustments may lead to a decline in planting area, impacting overall production [3]. Group 2: Company Initiatives and Farmer Support - Yan Shi Dehai Agricultural Technology Co., a leading company in the cotton sector, has developed over 10 high-quality cotton seed varieties, emphasizing the importance of quality seeds for increasing yield and farmer income [2]. - The company is actively processing and distributing high-quality cotton seeds to ensure timely planting, while also providing training and technical support to farmers on best practices for cotton cultivation [2]. - The approach of combining quality seeds with effective farming methods aims to enhance farmers' planting skills and ultimately increase their yields and income [2].

Group 1: Investment Rating - No investment rating information is provided in the report. Group 2: Core Viewpoints - The current market sentiment is optimistic, but the post - Spring Festival downstream operating rate is unknown. Therefore, the pre - holiday Zhengzhou cotton futures price is oscillating strongly at a high level. After the festival, focus on the downstream operating rate and the new cotton target price policy that may be announced in March or April. The strategy is to try going long at the lower edge of the oscillation range [3][20]. Group 3: Summary by Related Content Downstream Consumption and Price Movement - In December last year, due to the significantly higher operating rate of the downstream industry chain in the off - season compared to the same period of the previous year and the expectation of a reduction in the cotton planting area in Xinjiang in the next year, the Zhengzhou cotton futures price increased by 6.58%. From January to mid - February this year, the price continued to move sideways at a high level, and there may still be an upward trend in the future from a technical chart perspective [5]. - In the peak seasons of September and October last year, the operating rate of the downstream industry chain did not increase month - on - month, and the cotton price declined due to the expectation of increased production. However, in the off - seasons of November and December, the operating rate did not show a seasonal decline and remained at a relatively high level. As of the week of February 6, the spinning mill operating rate was 60.5%, 10 percentage points higher than the same period last year; the weaving mill operating rate was 19.4%, 7.9 percentage points higher than the same period last year [5]. Inventory and Procurement - As of the end of January, the national commercial cotton inventory was 5.79 million tons, 40,000 tons more than the same period last year; the industrial inventory was 1 million tons, 20,000 tons more than the same period last year. Since October 2025, the industrial inventory has continued to increase from 890,000 tons to the current 1 million tons, indicating high procurement enthusiasm of downstream spinning mills [5]. Import Situation - Currently, the domestic - foreign price difference has reached the highest level since 2014, with a very high import profit. The import profit with a 1% tariff exceeds 3,500 yuan/ton, and the import profit with a sliding - scale tariff is close to 2,500 yuan/ton. However, the increase in actual import volume is not large. In December 2025, China imported 180,000 tons of cotton, an increase of 40,000 tons year - on - year; in 2025, the cumulative import of cotton was 1.08 million tons, a decrease of 1.56 million tons year - on - year; from August 2025 to July 2026, the cumulative import of cotton was 560,000 tons, a decrease of 70,000 tons year - on - year [6]. - In December 2025, China imported 170,000 tons of cotton yarn, an increase of 20,000 tons year - on - year; in 2025, the cumulative import of cotton yarn was 1.5 million tons, a decrease of 20,000 tons year - on - year; from August 2025 to July 2026, the cumulative import of cotton yarn was 720,000 tons, an increase of 110,000 tons year - on - year. Brazil exported 115,000 tons of cotton to China in January, an increase of 46,000 tons year - on - year and a decrease of 31,000 tons month - on - month; from August 2025 to July 2026, Brazil's cumulative export of cotton to China was 478,000 tons, an increase of 96,000 tons year - on - year. As of January 22, 2025/26, the United States' cumulative export of cotton to China was 97,400 tons, a decrease of 66,000 tons year - on - year [6]. USDA Monthly Supply - Demand Report - The February USDA monthly supply - demand report is neutral. The estimated global output for the 2025/26 season is 26.1 million tons, an increase of 100,000 tons from the January estimate and 300,000 tons more than the previous season. The increase in output is from China, with an estimated output of 7.62 million tons in February, an increase of 100,000 tons from the January estimate. The estimated global consumption is 25.85 million tons, a decrease of 40,000 tons from the January estimate and 50,000 tons less than the previous season. The estimated global ending inventory is 16.35 million tons, an increase of 130,000 tons from the January estimate and 290,000 tons more than the previous season. The estimated global inventory - to - consumption ratio is 62.27%, an increase of 0.63 percentage points from the January estimate and 1.25 percentage points more than the previous season. The estimated export volume of the United States is adjusted down by 40,000 tons to 2.61 million tons compared to January, while the estimates of China, Brazil, and India change little [19].

Group 1: Report Investment Rating - No information provided on the industry investment rating Group 2: Core Viewpoints - The cotton market is expected to be volatile. Internationally, the US cotton futures price fell below 62 cents/pound, hitting a six - month low due to a stronger US dollar index. In China, the Zhengzhou cotton main contract showed a narrow - range oscillation with slightly decreased positions. Before the Spring Festival, the upward driving force for Zhengzhou cotton is limited as textile enterprises' restocking motivation is weak [2]. - The sugar market is also in a volatile state. In the international market, precious metals are fluctuating widely, and the fundamental impact is limited. In China, the trading volume is average, and it will be volatile before the Spring Festival. After the festival, it will first absorb the impact of the overseas market and then reflect the domestic production progress and new yield estimates [2]. Group 3: Summary by Directory Research Views - **Cotton**: On Thursday, ICE US cotton dropped 0.74% to 61.78 cents/pound, and the Zhengzhou cotton main contract decreased 0.27% to 14,610 yuan/ton, with positions down 4,804 hands to 711,500 hands. The 3128B cotton spot price index was 15,640 yuan/ton, down 20 yuan/ton. The 2026 Central Document No. 1 mentioned promoting the stable development of the cotton industry and improving the cotton target - price policy. Before the Spring Festival, the textile enterprises' restocking motivation is limited as the available days of cotton inventory have reached a five - year high [2]. - **Sugar**: In the 2025/26 sugar - making season as of February 3, 2026, 199 sugar mills in a certain region started production, the same as the previous season; the cumulative crushed sugarcane was 87.029 million tons, an increase of 21.269 million tons; and the sugar output was 8.0634 million tons with an average sugar - making rate of 9.27%. The price range of the Guangxi sugar - making group is 5,270 - 5,370 yuan/ton, with a few prices up 10 - 30 yuan/ton; the Yunnan sugar - making group's price is 5,110 - 5,180 yuan/ton [2]. Daily Data Monitoring - **Cotton**: The 3 - 5 contract spread is 60 yuan, down 10 yuan; the main contract basis is 1402 yuan, up 80 yuan. The Xinjiang spot price is 15,743 yuan/ton, up 5 yuan; the national average spot price is 16,012 yuan/ton, up 10 yuan [3]. - **Sugar**: The 3 - 5 contract spread is 10 yuan, down 2 yuan; the main contract basis is 106 yuan, down 14 yuan. The Nanning spot price is 5,300 yuan/ton, up 10 yuan; the Liuzhou spot price is 5,330 yuan/ton, unchanged [3]. Market Information - On February 5, the cotton futures warehouse receipts were 10,500, an increase of 62 from the previous day, with 1,283 valid forecasts. The cotton arrival prices in different regions were: 15,743 yuan/ton in Xinjiang, 16,063 yuan/ton in Henan, 16,068 yuan/ton in Shandong, and 16,203 yuan/ton in Zhejiang [4]. - On February 5, the yarn comprehensive load was 44.6, down 0.4 from the previous day; the yarn comprehensive inventory was 22.3, down 0.3; the staple - fiber cloth comprehensive load was 48.2, down 0.5; and the staple - fiber cloth comprehensive inventory was 32.5, up 0.1 [4]. - On February 5, the Nanning sugar spot price was 5,300 yuan/ton, up 10 yuan/ton; the Liuzhou sugar spot price was 5,330 yuan/ton, unchanged. The sugar futures warehouse receipts were 14,374, an increase of 158 from the previous day, with 345 valid forecasts [4][5]. Chart Analysis - The report presents multiple charts related to the cotton and sugar markets including the closing price, basis, contract spread, warehouse receipts, and price indices of these two commodities over different time periods [7][10][15][18]

Sugar Industry - As of February 3, 2026, 199 sugar factories have commenced operations, unchanged from the previous season [2] - Cumulative sugarcane crushed reached 87.03 million tons, an increase of 21.27 million tons compared to 65.76 million tons in the same period last season [2] - Sugar production totaled 8.06 million tons, with an average sugar extraction rate of 9.27% [2] - Spot prices for sugar in Guangxi range from 5,270 to 5,370 CNY/ton, with some increases of 10 to 30 CNY/ton; Yunnan's prices range from 5,110 to 5,180 CNY/ton [2] - Domestic trading is generally moderate, with a focus on the impact of holiday market conditions and production progress [2] Cotton Industry - ICE cotton prices fell by 0.74%, closing at 61.78 cents per pound, while Zheng cotton's main contract decreased by 0.27% to 14,610 CNY/ton [3][8] - The main contract's open interest decreased by 4,804 contracts to 711,500 contracts, and the cotton 3128B spot price index dropped by 20 CNY/ton to 15,640 CNY/ton [3][8] - The macroeconomic environment remains volatile, with a strengthening US dollar contributing to the decline in cotton prices, which have hit a six-month low [3][8] - The 2026 Central Document No. 1 emphasizes the stable development of cotton and sugar industries and the improvement of cotton target price policies [3][8] - As the Spring Festival approaches, textile enterprises are beginning to close, leading to limited upward momentum for cotton prices due to high inventory levels [3][8]

Group 1 - The core issue for textile companies is the need to secure over 2000 tons of cotton raw materials through basis point pricing, as current costs are high due to a premium of 1000 CNY/ton over futures prices, compounded by poor sales of downstream products [1] - Since late November 2025, domestic cotton prices have risen significantly, with an increase of over 1500 CNY/ton by early January 2026, currently stabilizing around 1200 CNY/ton [1] - Stakeholders in the cotton industry are closely monitoring changes in cotton planting areas in Xinjiang, with some regions seeing an increase in land rental prices by approximately 300 CNY/mu [1] Group 2 - Initial market expectations indicated a reduction in Xinjiang's cotton planting area from 41 to 43 million mu in 2025 to around 36 million mu, with a decrease of 5 to 7 million mu, particularly in less suitable cotton regions [2] - Current market sentiment suggests that the reduction in planting area will be gradual over three years or more, rather than an abrupt cut, with ongoing policies aimed at ensuring cotton farmers' income and the long-term development of Xinjiang's cotton industry [2] - Factors contributing to the anticipated decrease in cotton planting include lower seed cotton purchase prices in 2025, leading to minimal profits for farmers, a trend towards adjusting crop structures to favor grain over cotton, and unclear policies regarding target prices for the upcoming planting season [2]

Research Background - Xinjiang is the main cotton-producing area in China, accounting for over 90% of the national cotton output. The planting area in Xinjiang has increased year-on-year, and overall weather conditions have been favorable, but high temperatures and reduced sunlight during the flowering and boll-opening stages have lowered optimistic yield expectations [3]. Research Summary 1. Cotton Growth Status - The visual growth of cotton is good, but actual yield measurements are below expectations. The weight of seed cotton in southern Xinjiang has decreased compared to last year, leading to a significant decline in yield levels. The cotton fiber content has also dropped by 0.5 to 2 percentage points, resulting in a stable or slightly decreased cotton output compared to last year [4]. 2. Change in Yield Expectations - Prior to October, the market expected cotton production to be around 7.5 to 7.6 million tons. However, recent actual yield data suggests production may be just over 7 million tons, with the growth rate dropping from 10% to 5%. The purchase prices for seed cotton have been rising post-holiday, with current high purchase quotes for 38% net fiber content reaching 6.4 to 6.5 yuan/kg [5]. 3. Expected Decrease in Planting Area Next Year - Cotton prices have been weaker compared to previous years, and lower yields are expected to result in reduced profits per mu. Some cotton fields with low yields may be converted to other crops. The prices of intercropped crops have also significantly decreased, diminishing their revenue potential. Policies may further guide the reduction of cotton planting in less suitable areas, reallocating the area for food, oilseed, and high-efficiency crop cultivation [6]. 4. Potential Policy Support Reduction - The target price for Xinjiang cotton is set at 18,600 yuan per ton for 2023-2025, which is the last year of the current subsidy policy. Since the implementation of the target price policy in 2014, cotton production has increased by over 50%, but demand has not shown significant growth. Market expectations suggest that the target price may be reduced next year, with attention on policy documents expected to be released in March/April [8]. 5. Current Market Trend Expectations - Commercial cotton inventory levels are at historical lows, with the registered warehouse receipts for the November contract down 25% year-on-year, currently at 114,000 tons. The main contract is influenced by new cotton supply and demand expectations, with a tightening supply-demand situation anticipated for 2025/26, leading to a noticeable rebound in prices. The current market sentiment is positive regarding next year's cotton prices, with strategies such as the snowball strategy and attention to 1-5 reverse hedging and long call options recommended during the peak processing period [9].