BR production depends on the global market

The Brazilian cotton production will depend on the international market in the next years. For this crop (2007/08), the National Company for Food Supply (Conab) forecasts the planted area at 1.1 million hectare, 3.4 percent higher over the previous period. Regarding the production, the volume should be 4 percent superior, reaching 1.6 million tons. Considering that the Brazilian demand should keep stable, at roughly 1 million tons, there is no alternative except to export. The volume exported should reach 520 thousand tons in the 07/08 crop against the 415 thousand tons in the previous crop (Conab data).

According to the USDA, the global cotton production should reduce 2.7 percent in the 2007/08 crop compared to the previous one. The consumption should keep increasing around 4 percent. In general terms, inventories are forecast to decrease roughly 9 percent. In this context, the International Cotton Advisory Committee (ICAC) shows that average prices represented by the Cot A will increase 13 percent in the 2007/08 crop.

The year of 2008 starts with a great volume of anticipated trades. According to the Brazilian Commodity Exchange (BBM in Portuguese), 817 thousand tons of the 2007/08 crop was already traded until the end of December, which represents 52 percent of the production forecast by the Conab (1.6 million tons). Out of this total, 78 percent is directed to export.

Growers are optimistic about prices in 2008. From March to May this year, quotations at the ICE Futures are at 67 cents of dollar per pound, from July until October, at 70 cents of dollar per pound and in December 2008, at 74 cents of dollar per pound. In Dec/06, values were at roughly 50 cents of dollar a pound.

During the first fortnight of January, Brazilian cotton market moved at a better pace, with firm prices. The CEPEA/ESALQ Index for the type 41-4 (delivered in Sao Paulo city) closed at 1.3826 real or 0.7900 dollar a pound this Tuesday, upping 7 percent in Real over Dec 28th.


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