Exchange rate favors exports and reduces attractiveness of imports

Cepea, February 2, 2021 – Dollar quotes have been higher than the Brazilian currency since early 2020, with peaks in May and October. In January, the USD averaged 5.3582 BRL, 29.11% up compared to that registered in January 2020, in nominal terms. In the same comparison, cotton prices at ICE Futures rose 15.4%, and the Cotlook A Index, almost 10.2%.


This scenario pushed up the revenue obtained with exports, but, on the other hand, it increased expenses with imports. In January/21, while domestic prices averaged 4.3243 BRL per pound, the FOB Santos export parity is at 4.0606 BRL/pound. Conab data indicate that, from January 18-22, the CIF São Paulo import parity, with drawback operations, was at 5.2953 BRL per pound.


In this context and in light of the large domestic surplus, sellers preferred to close new trades to export in late January, while purchasers tend to prioritize domestic acquisitions. As a result, the low supply in the spot market in Brazil and higher price offers affected trades.


Meanwhile, Brazilian shipments were firm in January – although the pace of exports reduced at the end of the month. Secex data indicate that the daily average was at 16.4 thousand tons (up to the third week of January), 16.9% up compared to that registered in the same period last year. Up until late January, exports have totaled 246.1 thousand tons, accounting for 79.7% of the entire volume sold in January 2020 (308.8 thousand tons).


PRICES – Between December 30 and January 29, the CEPEA/ESALQ cotton Index, with payment in 8 days, rose 19.96%, closing at 456.95 BRL per pound on Jan. 29. The average in January was 4.3243 BRL/pound, 12.6% higher than December/20.




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