International valuations and high exports keep cotton prices on the rise in Brazil

Cepea, March 2, 2021 – Cotton prices increased in the Brazilian market in February, boosted by international valuations and the fast exports pace. Besides, with the large amount of the current season already sold and the uncertainties about the size of the new crop, sellers left the market, helping to push up quotes in Brazil.


Purchasers were concerned about passing on cotton valuations to its by-products and, thus, were trying to extend the term of payment. It is worth to consider that the prices of textile products dropped in the retail market in 2020, according to data from the IBGE.


Between January 29 and February 26, the CEPEA/ESALQ Index for cotton rose by 10.7%, closing at 5.0595 BRL per pound on Feb. 26, the highest nominal level in the series of Cepea for this product, which began in July 1996.


According to Cepea collaborators, cotton prices should remain firm in Brazil in the coming weeks, underpinned by the high levels of international prices, the strong dollar and firm international demand. Despite the record harvest in the 2019/20 season, high international demand is lowering cotton supply in the Brazilian market, making sellers more unwilling to lower asking prices. Up to the third week of February, according to data from Secex, Brazil had exported 179.7 thousand tons of cotton, 5.8% up from the volume shipped in the same period last year and the highest amount exported in a month of February since 1996. Between August 2020 and February 2021, Brazil exported 1.56 million tons of cotton.


Concerned about the price rises along the domestic textile chain because of the cotton valuation, purchasers left the market in late February, reducing liquidity, despite the purchasing needs of some agents for the short term. Meanwhile, the interest in early purchases was increasing in the domestic market, with some deals closed (at fixed prices) for exports.


2020/21 CROP – Abrapa has released that, up to February 18, cotton sowing in the 2020/21 season had reached 96% of the expected area in Brazil. In Bahia, the area sown was at 98%; in Mato Grosso, at 95%; in Minas Gerais, at 96%; in Mato Grosso do Sul, at 99%; and in Tocantins, at 98%. In Goiás, Maranhão, Piauí, São Paulo and Paraná, sowing was over.


Still according to Abrapa, the area sown in the 2020/21 season may total 1.356 million hectares, 16% smaller than that in the previous season. Productivity estimates were revised down by 1.5%, to 1,770 kilos per hectares. Thus, cotton production is expected to decrease by 17% compared to that in the 2019/20 season, to 2.402 million tons.


CONAB – According to a report from Conab (Brazil’s National Company for Food Supply) released on Feb. 11, the 2020/21 crop should be lower than that previously estimated. The area sown with cotton may shrink by 4.7% compared to that forecast in January and by 13.1% compared to the area in the previous season, totaling 1.45 million hectares. Productivity is predicted at 1,743 kilograms/hectare, 3.3% down from the previous season (2019/20). Thus, production is estimated at 2.52 million tons, 16% lower than the previous.




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