Cepea, April 17, 2020 – Despite the cotton off-season in Brazil, supply has been higher than demand. In the first fortnight of April, some sellers were willing to lower asking prices, but the few purchasers in the market bid prices even lower. Most processors, which are halted because of the coronavirus pandemic, were waiting for better definitions in order to resume activities. Many agents were cautious and away from the market.
Processors lowered production, consuming stocked cotton. Only some deliveries (related to the cotton previously purchased) were confirmed – however, most have been postponed. Others may still halt production, since they have inventories and have received only a few orders.
With a weak demand in Brazil, prices dropped in the first half of April. Between March 31 and April 15, the CEPEA/ESALQ cotton Index, with payment in 8 days, decreased by 1.9%, closing at 2.7861 BRL per pound on April 15.
In the international market, both demand and prices decreased too, reducing the number of exports deals in Brazil. Shipments of cotton purchased through term contracts continued, but were at a slower pace. It is worth to mention that Brazilian cotton growers have already sold a large volume of the 2019/2020 crop.
Data from the BBM (Brazilian Commodity Exchange), daily tabulated by Cepea, indicate that at least 26.1% of the 2019/2020 Brazilian crop (estimated at 2.88 million tons by Conab) may have been sold until April 13. Of this total, 24.9% were allocated to the Brazilian market, 59%, to the international market, and 16.1%, to flex contracts (exports with an option to the Brazilian market).
In Mato Grosso, 76.64% of the state output, estimated at 1.93 million tons, have already been traded, according to information from Imea released on April 13. This volume is higher than the average in the last five years (59.86%) and above the 67.02% from the same period last year (related to the 2018/19 crop). It is worth to mention that the volume indicated by Imea is much higher than that registered by the BBM.
USDA – Data from the United States Agricultural Department released on April 9 indicated that the world cotton production in the 2019/2020 season may total 26.5 million tons, 2.6% higher than the previous, boosted by India and the United States. For Brazil, whose estimates were kept stable from a crop to the other, production was revised up by 1.6%, to 2.874 million tons in the 2019/2020 season.
On the other hand, world consumption estimates were revised down by 6.4% compared to that forecast in March and by 8.1% compared to that in the 2018/19 crop, to 24.08 million tons – the lowest in six crops. This is linked to the covid-19 pandemic worldwide. In this scenario, world inventories were revised up to 19.87 million tons, 9.4% up compared to that forecast in the previous month and 13.7% higher than that in the 2018/19 season. It is worth to mention that the sharpest inventory increases from a crop to the other were observed for India (66.6%), Brazil (10.8%) and the United States (38.2%).
CONAB – In a report released on April 9, Conab (Brazil’s National Company for Food Supply) indicated that 1.68 million hectares were sown in Brazil in the 2019/2020 crop, 0.4% up compared to that reported in March and 3.6% higher than that in the 2018/19 season (1.62 million hectares). Production was revised up by 0.9% compared to that previously reported and by 3.7% compared to that in the previous season, to 2.88 million tons. The average productivity in the 2019/2020 crop was revised up by 0.6% from a month to the other, to 1,717 kilos per hectare, the same as that in the previous season.
In Mato Grosso, new estimates point to an increase around 7% for both the cotton area and output in the 2019/2020 season, to 1.17 million hectares and 2 million tons, respectively – considering the average productivity at 1.1716 kilos per hectare (3.2% up compared to that in the 2018/19 crop).
For Bahia, Conab revised down area estimates by 5.1%, to 315.1 thousand hectares in the 2019/2020 crop, against 332 thousand hectares in 2018/19. The average productivity should be at 1,760 kg/ha, 1.1% up compared to that previously reported, but 2.2% lower than that in 2018/19. Thus, production should be 7.2% lower than that in the previous season, to 554.6 thousand tons.
EXPORTS IN MARCH – According to data from Secex, Brazilian cotton exports totaled 140.7 thousand tons in March, the lowest in seven months. However, that is the highest volume ever shipped in a month of March. That amount was 17.2% lower than that exported in February, but 33.7% higher than that from March/19. In the 2019/20 season (August/19 to March/20), Brazil shipped 1.65 million tons of cotton, 26% more than that in the previous season (August/18 to July/19), at 1.3 million tons.