1. Report Industry Investment Rating - Not provided in the given content 2. Core Viewpoints of the Report - In the second quarter of 2026, Zhengzhou cotton may face risks of oscillating decline. Attention should be paid to macro - factors, downstream demand, and weather in major producing countries. In the long - term, a relatively optimistic view is held for both domestic and international cotton, and opportunities to buy long - term contracts on dips are recommended. The estimated range for Zhengzhou cotton in 2026 is 14,500 - 17,000 yuan/ton, and the estimated operating range for ICE cotton is 60 - 80 cents/pound [105][106] 3. Summary by Relevant Catalogs 3.1 Market Review - In Q1 of 2026, the outer - market cotton first declined and then rebounded. The main contract of Zhengzhou cotton continued to rise to around 15,500 yuan/ton. The spread between domestic and foreign cotton remained at a high level, reaching over 4,000 yuan/ton at one point and then narrowing to over 3,000 yuan/ton [2][4][5] 3.2 Impact of Middle - East Geopolitical Conflicts on Cotton - The impacts are multi - faceted, including fiber substitution (positive), cost increase (positive), supply reduction (positive), inflation (positive), and negative impacts on industrial demand. Overall, the impact is neutral [7] 3.3 Domestic Cotton Fundamental Analysis - **Commercial Inventory**: It has entered the seasonal destocking period. As of March 15, the national commercial inventory increased slightly by 52,100 tons year - on - year, while the Xinjiang commercial inventory decreased by 129,100 tons year - on - year. Attention should be paid to the destocking speed [12] - **Industrial Inventory**: As of the end of February, the national cotton industrial inventory was at the highest level in the same period in history for nearly four months. As of March 15, the national industrial inventory decreased to 902,700 tons, a decrease of 54,600 tons compared with the same period last year [17] - **Planting Area**: The reduction of cotton planting area in Xinjiang may be less than previously expected. It is initially estimated that the planting area in 2026 will be reduced by about 3%, and the output is expected to remain above 7 million tons [21] - **Import**: The 300,000 - ton sliding - scale tariff processing trade quota has narrowed the domestic - foreign spread but it remains high. In January - February 2026, cotton imports totaled 370,000 tons, a year - on - year increase of 41%, and棉纱 imports totaled 290,000 tons, an increase of about 80,000 tons year - on - year [26] - **Textile Industry**: The "Golden March" textile peak season was realized, but there may be pre - emptive demand. The new orders in late March decreased significantly. The textile enterprises' product inventory is low, but the social inventory of cotton yarn has risen to a relatively high level [33][40] - **Terminal Textile and Apparel**: In January - February 2026, the export of textile and apparel totaled 50.45 billion US dollars, a year - on - year increase of 17.6%. The domestic retail sales of textile and apparel increased by 10.4% year - on - year, and the online retail sales of wearing goods increased by 18% year - on - year [51][55] - **Supply - Demand Balance**: In the 2025/2026 period, the supply - demand is expected to be in a tight balance. In the 2026/2027 period, the supply - demand gap is expected to widen [58][59][60] 3.4 International Cotton Fundamental Analysis - **US Cotton**: The export signing progress of old - crop cotton is still slow, but it is expected to meet the export target. The USDA's intended planting area in late March increased slightly year - on - year. The weather has a greater impact on the yield of new - crop cotton. The initial assessment of the 2026/2027 supply - demand pattern shows a slightly loose balance under normal weather conditions [67][76][85] - **Brazilian Cotton**: The planting area and output are expected to decline slightly. The 2025/2026 total output is expected to be 3.795 million tons, and the planting area is expected to be 2.0136 million hectares [88][89] - **Global Supply - Demand**: In the 2025/2026 period, the global supply - demand is in a loose balance. In the 2026/2027 period, the supply - demand is expected to tighten, but high oil prices bring great uncertainties to the demand outlook [90][99] 3.5 Market Summary and Outlook - **2026 Q2**: Zhengzhou cotton may face risks of oscillating decline. Attention should be paid to macro - factors, downstream demand, and weather in major producing countries. The outer - market may also experience oscillations, and the price center is expected to move up slightly compared with Q1 [105][108] - **Long - term**: A relatively optimistic view is held for both domestic and international cotton. The estimated range for Zhengzhou cotton in 2026 is 14,500 - 17,000 yuan/ton, and the estimated operating range for ICE cotton is 60 - 80 cents/pound [106]