Cepea, July 2, 2021 – The gap between bidding and asking prices has been constraining deals in the Brazilian cotton market. This scenario is linked to agents’ different perspectives about the market in the coming weeks.
While some sellers are unwilling to lower asking prices, aware of the decrease in cotton inventories, purchasers are based on the price gap between the Brazilian and the international markets, the progress of the harvesting and the dollar appreciation against the Real. It is important to highlight that the interest of some agents in selling the product in the domestic market (which remunerates more than exports) helps to lower prices too.
As regards inventories, the fast exports pace in the last 12 months and higher demand in Brazil this year contributed to lower the domestic surplus. This month, Brazilian inventories have been the lowest for June since 2018. Thus, domestic prices have been higher than the prices of the cotton delivered to China for months. Therefore, gradual adjustments between the import and export parities are expected.
The harvesting of the new cotton crop is beginning in Brazil, having reached 3% of the national area until June 24, according to Abrapa.
On June 30, the CEPEA/ESALQ Index for cotton closed at 4.6913 BRL/pound, 7% lower than that on May 31.