Cepea, November 19, 2019 – The US dollar appreciation against Real (by 4.4%) this month (until Nov. 14) and the current high price levels for cotton in the international market made Brazilian sellers, mainly trading companies, unwilling to lower asking prices for the product.
In this scenario, quotes increased in the Brazilian market in the first fortnight of the month. Between October 31 and November 14, the CEPEA/ESALQ cotton Index, with payment in 8 days, rose 2.37%, closing at 2.5714 BRL per pound on Nov. 14 – the highest nominal level since July 19, 2019.
Some sellers have already traded a large volume of the total output and were accomplishing contracts previously closed. On the other hand, some processing plants, mainly in northeastern Brazil, and traders in need of higher quality batches were willing to pay more for the product, but had difficulties to find batches available. In general, liquidity was low in Brazil in the first fortnight of November.
As regards early contracts, data from the BBM (Brazilian Commodity Exchange) tabulated by Cepea show that 45% of the 2018/19 Brazilian cotton crop (estimated at 2.726 million tons by Conab – National Company for Food Supply) may have been traded until November 12. Of this total, 45.3% were allocated to the Brazilian market, 39.6%, to the international market, and 15%, to flex contracts (exports with an option to the domestic market).
In Mato Grosso, data from Imea released on November 7 indicated that 87.82% of the output from the state, estimated at 1.948 million tons, may have been traded. It is worth to mention that the volume indicated by Imea is much higher than that estimated by the BBM.
Concerning anticipated deals, the trading pace was faster for both exports and the domestic market – for the 2018/19 and the 2019/20 crops. Besides the deliveries scheduled for late November and December, some processors were trying to purchase cotton for 2020, mainly for the first months of the year. Trading companies were also taking advantage of the valuations, fixing prices for contracts previously closed – based on quotes at ICE Futures.
EXPORTS – As exports are remunerating more than the Brazilian market, cotton shipments were high in October, totaling 273.4 thousand tons, almost two-fold that from September and a record. This amount was also 20% higher than the previous record, observed in December/18, at 227.9 thousand tons, according to data from Secex.
Revenue, in turn, totaled 440.7 million USD, 92% up compared to that from September (229.5 million USD) and 43.7% higher than that from Oct/18 (306.8 million USD). The average price in October, at 0.7311 USD per pound (or 2.9858 BRL/pound), was 19.7% higher than that in the domestic market.
IMPORTS – According to Secex, the Brazilian cotton imports totaled 141.1 tons in October, 53.3% up compared to that from September, but 52.3% down compared to that in Oct/18 (286 tons).