Due to the significant dollar appreciation against the Real, Brazilian exporters are more willing to accomplish anticipated contracts. On the other hand, they have resisted settling new export contracts, once futures have decreased and the costs of production keep high. To delivery in October, export contracts that were settled between March/06 and September/08, according to Cepea, averaged 0.6148 dollar - FOB values in Paranaguá and Santos ports.
In the domestic market, cotton prices kept firm even with ginning process. The support came from growers' retreat and the dollar valuation against the Real. From August 29th to September 30th, the CEPEA/ESALQ Index for the cotton type 41-4 (delivered in Sao Paulo city, payment in 8 days - the most common commercialization in Brazilian market) upped 3.1 percent in Real, closing at 1.2311 real or 0.6466 dollar a pound on Sept 30th. Moreover, the higher demand of the textile sector, which normally increases the manufactured production in the last trimester of the year, reinforced the upward trend.
Harvest activities are finishing. According to the Brazilian Commodity Exchange (BBM), until Sept 19th, 1.154 million tons of the cotton from 2007/08 crop were already traded, which represents 72 percent of the volume projected by the Conab. Of the total registered by the BBM, 472 thousand tons were directed to the domestic market and 682 thousand tons, to the international one.
In global terms, the 2008/09 crop production was forecasted at 24.4 million tons, a decrease of 6.8 percent compared to 2007/08 crop, according to the USDA report published on Sept 12th. The consumption was estimated at 26.9 million tons, slight decrease of 0.1 percent, however superior to the production. Based on these data, the ending stocks should reduce 14 percent. (Cepea - Brazil)