Exchange rate and costs reduce gains in this crop

Comparing the 2007/08 crop (from August/07 to July/08) to the previous season, Brazilian and international cotton prices increased. The Cot A, reference in the global market, averaged 0.7435 dollar per pound this crop, 22.8 percent higher over the 2006/07 crop. For the CEPEA/ESALQ Index for the type 41-4 (delivered in Sao Paulo city, payment in 8 days - the most common commercialization in Brazilian market), the increase reached 17 percent, at 0.7378 dollar a pound. Even with this positive scenario, growers' profits were limited by the higher costs of production and by the Real appreciation against the dollar - in the 2007/08 crop, the exchange rate decreased 15.8 percent in relation to the previous period, averaging 1.75 real per dollar.

During the first fortnight of August, the harvesting progress of the cotton from 2007/08 crop started to press domestic quotations down effectively. Moreover, growers and wholesalers accepted trading at lower values. Between July 31st and August 15th, the CEPEA/ESALQ Index for the type 41-4 (delivered in Sao Paulo city, payment in 8 days - the most common commercialization in Brazilian market) dropped 3.5 percent in Real, closing at 1.2121 real or 0.7391 dollar a pound on Aug 15th. Some cotton growers, however, kept focused on accomplishing export and domestic contracts, which limited the decreases in Brazil.

Besides the harvest time, textile mills pressed cotton quotations based on the lower thread prices in the manufactured products market. The main problem is still the competition with imported products.

To export, trades remain moving at a slow pace. According to the Brazilian Commodity Exchange (BBM), until the beginning of this month, 461 thousand tons of the cotton from 2008/09 crop were already traded to export. (Cepea - Brazil)

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