The cap, at about 36 million mu (2.4 million hectares), is the most aggressive structural adjustment to Xinjiang cotton in years, the US Department of Agriculture's Foreign Agricultural Service in Beijing said in its annual report on 22 April.

Set against a 2025 actual planted area of 41 to 43 million mu, a figure carried by Chinese business media Sina Finance, it implies a cut of 12 to 16 per cent. FAS Beijing forecast 2026/27 production at 7.2 million tonnes, down 4.5 per cent on the year.

Xinjiang accounts for about 93 per cent of Chinese cotton output, according to China's National Bureau of Statistics. China and India compete year-on-year as the world's two largest cotton producers, each at about 5.5 million tonnes; the United States, Brazil and Pakistan trail, FAO data show.

Xinjiang's growers operate inside one of China's largest commodity-support schemes. Beijing paid about 18.4 billion yuan ($2.7 billion) under the cotton target-price programme in marketing year 2025/26, FAS estimates, with subsidies flowing whenever the market price drops below 18,600 yuan per tonne ($2,700).

The change in water and growing area policy lands at the moment farmers most need the wells China aims to retire.

Cotton has just begun emerging in southern Xinjiang's Tarim Basin — the larger of the region's two cotton zones — into a 31-day dry spell, with surface soil moisture at 23 per cent of the 30-year baseline and average temperatures running 4.7°C above normal, Cropli's weather monitoring shows.

The European Centre for Medium-Range Weather Forecasts, which relies on a 50-member ensemble forecast, shows only one forecast member puts cumulative rainfall at Aksu above five millimetres over the next two weeks. The 30-day dry spell at Aksu is forecast to extend to 77 days through mid-June, with weekly maximum temperatures climbing to 40°C — well above the optimum range for cotton at squaring.

The dry conditions stand in contrast to the FAS' own report, which described the "distinct advantage" for spring planting provided by recent weather, while Chinese state media have echoed similar framing.

Water usage clampdown, prices rally

Beijing's curbs on water access come in several forms: zonal bans on cotton cultivation, irrigation restrictions, and increased water taxes in over-extracted areas. Target-price subsidies have also been confined to land inside the cap.

Southern Xinjiang, where most of the recent cotton expansion has taken place, faces the steeper cut.

Beyond China, cotton prices have rallied.

The Cotlook A Index climbed from 75 to 82 cents per pound in April. The CEPEA daily benchmark for Brazilian cotton is up 28 per cent from its December low, at 81.6 cents per pound on 29 April. China's domestic CC Index 3128B reached 16,725 yuan per tonne on 22 April, a two-year high.

Domestic restrictions and rising prices come as China loosens its import regime. March saw 289,000 tonnes of cotton imports, up 29 per cent on the year, according to General Administration of Customs data, with Brazil and Australia together accounting for 71 per cent of the haul.

The National Development and Reform Commission also released 300,000 tonnes of additional sliding-scale tariff quota on 16 March, five months earlier than the usual schedule. Cumulative cotton imports for the first quarter reached 724,000 tonnes, 21.7 per cent above the same period a year earlier.

The exception to the import surge is the United States, China's biggest cotton supplier in 2024, which fell to a 4.5-per-cent share over the first seven months of the 2025/26 marketing year, down from 17.1 percent a year earlier.

In dollar terms, US cotton exports to China dropped 85 per cent in 2025, US Census Bureau data show, the largest annual decline in at least 15 years.

The current target-price scheme expires with this season's crop. Beijing's January No. 1 Document said the central government would "continue to improve the cotton target-price-based policy" but did not publish the new level.

Without it, neither Xinjiang's farmers nor international traders know how hard the area cap will bite.