Cepea, August 18, 2020 – In the first fortnight of August, Brazilian cotton prices returned to the nominal levels registered in December 2018. In general, prices were underpinned by supply in the domestic market, which is currently lower than demand.
Although the harvesting of the 2019/20 cotton crop is advancing in Brazil (production may hit a record), sellers were unwilling to lower asking prices in the first half of the month. Growers, in turn, are aware of the current dollar level and focused on the accomplishment of term contracts, primarily for exports, keeping supply low in the Brazilian spot market, mainly of higher quality cotton.
Purchasers, in turn, were interested in closing new deals in the spot market and, in order to buy small volumes, needed to increase bidding prices. However, agents from some processors were still waiting for prices to drop – these agents are based on the faster processing pace and the possible supply increase.
This context increased both liquidity and prices in Brazil. Between July 31 and August 14, the CEPEA/ESALQ Index for cotton rose by 7.1%, closing at 3.0588 BRL per pound on August 14 – the last time the Index hit this level was in December 2018.
CONAB – According to a report released by Conab (Brazil’s National Company for Food Supply) in the first half of August, the area sown with cotton in Brazil in the 2019/20 season increased by 0.15% compared to that previously reported, to 1.67 million hectares (+3.3% compared to that in the 2018/19 crop). With the favorable weather, productivity was revised up by 1.19%, to 1.753 kilos per hectare (+2.1% compared to that last crop). Thus, production is estimated at 2.93 million tons, 1.33% up compared to that previously reported and 5.4% higher than that in 2018/19, hitting a new record.
ABRAPA – In a report released on August 7, Abrapa (Brazilian Cotton Producers Association) indicated that the cotton harvesting in Brazil had reached 56.3% of the area.