Cotton prices are firm in Brazil and more attractive than exports

Cepea, June 16, 2021 – Cotton prices have been firm in the Brazilian market and 23% higher than the export parity for almost two months, confirming that sales in the domestic market have been more profitable than exporting the product. However, the Brazilian market is expected to consume only 17% of the national cotton supply, meaning that exports need to be high.

 

In general, in the first half of June, agents from the Brazilian cotton market continued focused on closing term contracts, keeping liquidity low in the national spot market. Domestic processors were purchasing small volumes, enough to meet prompt demands and/or replenish inventories. Traders were interested in buying cotton, aiming to accomplish contracts previously closed.

 

Between May 31 and June 15, the CEPEA/ESALQ Index for cotton dropped by 1.6%, to 4.9603 BRL/pound on June 15.

 

Meanwhile, Brazilian cotton exports are heading to renew the monthly record in June. In the first eight working days of the month, Brazil exported 47.2 thousand tons of cotton, according to data from Secex, which accounts for 83.2% of the total amount exported in June 2020 (21 working days). The daily average of shipments is currently at 5.9 thousand tons, 7.5% higher than the daily average in May/21 (5.5 thousand tons).

 

As for anticipated deals, agents from some processors were trying to purchase cotton through term contracts, majorly for the 2020/21 crop.

 

CONAB – In a report released on June 10, Conab (Brazil’s National Company for Food Supply) estimated the area allocated to cotton crops in the 2020/21 Brazilian season at 1.37 million hectares, 17.9% smaller than that in 2019/20 and 0.8% down from that previously reported. Productivity is forecast at 1,713 kilograms per hectare, 4.9% down from that last season. Thus, the output may total 2.342 million tons, 22% lower than that in 2019/20.

 

Conab estimates cotton consumption at 680 thousand tons in the 2020/21 season, against 600 thousand tons last season. However, as the domestic availability is forecast at 4.11 million tons, Brazilian cotton exports may total 2.23 million tons in 2021, a record. Stocks are forecast at 1.2 million tons in December/21, against 1.7 million tons in December/20.

 

(Cepea-Brazil)

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