Exports and strong dollar push up quotes in Brazil

Cepea, March 3, 2020 – Cotton prices increased in the Brazilian market in February, reflecting the fast exports pace for the national product, the US dollar appreciation against Real – which increases the exports parity price – and estimates for a smaller cotton area in the United States in the 2020/21 season. According to the USDA, the area allocated to cotton in the USA is likely to shrink by 9%, to 5.1 million hectares.


Between January 31 and February 28, the CEPEA/ESALQ cotton Index, with payment in 8 days, rose 4.1%, closing at 2.9259 BRL per pound on February 28.


As for liquidity, the trading pace for cotton slowed down in the Brazilian spot in the second fortnight of February, due to the lack of purchasers in the market – with the sharp price rises for cotton, these agents were not interested in trading the product, working with inventories and/or with the product purchased through contracts. Sellers, in turn, were unwilling to lower asking prices, since they are aware of the strong US dollar and the price rises in China.


USDA – According to data from the USDA released on February 11, the 2019/20 world cotton crop should total 26.4 million tons, 2.3% higher than that in the previous season. India and China altogether produce the largest volume. Brazil ranks in fourth, with an output of 2.76 million tons in the 2019/20 season, 2.3% lower than that in the previous crop. As regards world consumption, the USDA pointed to a decrease of 1%, to 25.91 million tons. Stocks are estimated at 17.9 million tons, 2.7% up in the season.


As regards imports, the USDA pointed to an increase of 3.2% in the 2019/20 crop, totaling 9.48 million tons, and exports are estimated at 9.48 million tons, 5.3% up in that period.





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