Fierce competition between agents limits cotton trades in Brazil; prices oscillate

Cepea, July 16, 2020 – The trading pace for cotton was slightly faster in the Brazilian market in the first fortnight of July. However, the volume marketed was limited by the fierce competition between agents about bidding and asking prices.

 

Agents from some processors were trying to replenish inventories, and traders needed to accomplish contracts. On the other hand, many purchasers reported difficulties to find batches with higher quality cotton – when they found it, prices were higher.

 

Some processors were trying to postpone the deliveries of the cotton from the 2018/29 crop, so that they do not need to turn off machines between seasons. It is worth to mention that difficulties to make cash flow are forcing some plants to ask longer payment deadlines – in some of them, activities are halted.

 

As for sellers, most of them were focused on the harvesting of the new 2019/20 crop. Until the end of the fortnight, only a few batches with cotton from the new season were available, and lower quality was reported for some volumes.

 

In general, either purchasers needed to agree on buying lower quality cotton or sellers had to lower asking prices. Amid this fierce competition, prices oscillated in the fortnight. Between June 30 and July, the CEPEA/ESALQ cotton Index, with payment in 8 days, rose by a slight 0.76%, closing at 2.7315 BRL per pound on July 15.

 

CONAB – On July 8, Conab (Brazil’s National Company for Food Supply) released new estimates revising down the area sown with cotton in Brazil in the 2019-20 crop, by 0.14% compared to that estimated in June/20, to 1.67 million hectares (+3.1% larger than that in the 2018-19 season). Productivity was revised up by 0.32% between June and July and by 0.9% compared to that last season, to 1,733 kilos per hectare. Thus, the output is forecast at 2.89 million tons, 0.18% up compared to that previously reported and 4% higher than that in the 2018/19 season.

 

In Mato Grosso, the area sown with cotton in the 2019-20 season was kept at 1.17 million hectares, but productivity and production were revised up, both by 0.51%, to 1,724 kg/ha and 2.01 million tons (compared to the 2018-19 crop, productivity increased by 3.8% and production, by 7.6%). According to Imea, until July 10, the harvesting had reached 5.16% of the area estimated for the state.

 

In Bahia, area and production estimates were revised down compared to that previously reported, both by 0.54%, to 313.4 thousand hectares and 567.9 thousand tons – compared to that last crop, area has shrunk by 5.6% and production, by 5%. Productivity, however, was kept at 1,812 kg/ha. As regards the harvesting, 9% of the area had been harvested until the end of June, according to Conab. In general, the weather has been favorable to crops.

 

(Cepea-Brazil)

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