Cepea, August 20 2019 – Cotton purchasers were not interested in closing new deals in the Brazilian spot market in the first fortnight of August. Agents from most processing plants were working with the cotton stocked and/or previously purchased through contract, and when necessary, searched for small amounts to replenish inventories – however, bidding prices were low. Only some traders were purchasing cotton, aiming to extend the delivery period, while trading companies were away from the market, aware of the low price levels in the international market as well as the US dollar appreciation in the first half of the month.
Concerning sellers, many of them are focused on the accomplishment of contracts previously purchased. According to Cepea collaborators, cotton processing has been slow in Brazil, due to the harvesting delay and the large crop. Besides, sellers claim that the current price levels are too low. Between July 31 and August 15, the CEPEA/ESALQ cotton Index, with payment in 8 days, dropped 2%, closing at 2.4559 BRL per pound on August 15 – prices have been dropping for 10 consecutive weeks now.
Between December 28 2019 and August 12 2019, the Index decreased 20%, against 18% in the same period last year (Dec 28 2017 and August 13 2018). The average Index this month, at 2.4701 BRL per pound, is 5.88% lower than that from July/19.
FIELD – Data from Imea released on August 9 indicated that the harvesting in Mato Grosso has reached 46.66% of the total area estimated (1.072 million hectares). Still according to Imea, 79.48% of the output from MT – estimated at 1.846 million tons – may have been traded. Data from the BBM indicate that 31.5% of the output from that state may have been traded until August 13, while 35.9% of the Brazilian output may have been marketed already.
In a report released on August 8, Conab (National Company for Food Supply) increased by 1% (compared to that previously reported in July) estimates for the Brazilian output in the 2018/19 crop, now to 2.691 million tons, 34.2% larger than that in the previous season – due to the increase (+0.63%) in the area to be sown, to 1.61 million hectares (+37.1% compared to that in the previous crop). The average productivity, in turn, was revised up too – compared to that reported in July/19 –, by 0.36%, now to 1,671 kilos per hectare, but still 2.1% smaller than that in 2017/18.
In Mato Grosso, the volume to be harvested is forecast at 1.781 million tons, 0.92% up compared to that estimated in July/19 and 38.1% larger than that in 2017/18. Still according to Conab, the average productivity in Mato Grosso should decrease 1.1%, to 1,641 kilos per hectare. In Bahia, cotton harvesting should total 597.6 thousand tons, 2.38% up compared to that estimated in July and 19.9% larger than that from 2017/18. In July, Conab forecast a 7% decrease in the average productivity, against 2.4% in August, to 1,845 kilo per hectare.
EXPORTS AND IMPORTS – Data from Secex indicate that, in July/19, Brazil shipped 46.95 thousand tons of cotton, 24.2% down compared to that in June/19 (61.9 thousand tons) and a staggering 8.7 thousand tons higher than that from July/18 (+440.6%). Between January and July 2019, that volume more than doubled compared to that from the same period last year. Secex indicates that Brazil imported 323.9 tons of cotton in July/19, 39% up compared to that shipped in June, but a steep 95.9% down against that from July/18 (4.02 thousand tons).
INTERNATIONAL MARKET – Data from the USDA released on August 12 indicated that the global cotton production in 2018/19 may total 25.95 million tons, 3.7% lower than that in the previous season, while consumption should total 26.26 million tons (1.7% down). Global imports should reach 9.1 million tons (+2%) and exports, 8.9 million tons (-0.3%). Global inventories in the 2018/19 crop is estimated at 17.48 million tons, 1.3% up compared to that in the previous month, but still 0.9% smaller than that in the previous season.
For the 2019/20 crop, the USDA expects production to total 27.35 million tons, 5.4% higher than that in the previous season. Global consumption, in turn, may grow by 2%, to 26.8 million tons. Trades should reach 9.6 million tons, with a 5% increase in imports and a 7.4% increase in exports, compared to 2018/19.
Global inventories, in turn, are estimated at 17.95 million tons, 2.5% larger than that forecast in July and 2.7% larger than that in 2018/19, according to the USDA. In Brazil, inventories are forecast to increase by 1.5%.