International devaluations constrain price rises in the Brazilian market

Cepea, March 17, 2021 – International price drops and the consequent decrease in the export parity constrained the upward trend of cotton quotes in Brazil in the first fortnight of March.

 

Between February 26 and March 15, the CEPEA/ESALQ Index for cotton dropped by a slight 0.5%, closing at 5.0337 BRL on March 15. It is worth to mention that the highest nominal level in the series of Cepea was registered on March 4, when the Index closed at 5.2251 BRL/pound. This month, this Index has been 11% higher than the export parity, on average.

 

Liquidity was low in the Brazilian market in the first half of March. The resume of stricter social distancing measures to stop covid-19, majorly in São Paulo, made agents cautious about new purchases and concerned about sales performance. It is worth to consider that agents from some processors were claiming difficulties to pass on cotton valuations to by-products even before the resume of these measures.

 

Sellers continued unwilling to lower asking prices and focused on delivering the cotton previously purchased. According to Cepea collaborators, in some regions, majorly Mato Grosso, rainfall hampered the harvesting of soybean and cotton deliveries. According to Abrapa, the area allocated to cotton crops (2020/21 season) in Brazil shrank by 16% compared to that in the previous season, and sowing has ended.

 

Traders have been cautious about closing new deals, while agents from trading companies have been more interested in purchasing and selling cotton – occasionally, these agents ask lower prices than cotton farmers do in the domestic market.

 

(Cepea-Brazil)

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