Liquidity decreases in Brazil, but prices continue firm

Cepea, December 17, 2019 – The number of agents in the Brazilian cotton market decreased in the first fortnight of December, lowering liquidity. Still, prices remained firm in Brazil. With the nearness of the holiday season, sellers were focused on accomplishing contracts, while others were still processing the 2018/19 crop.

 

As regards purchasers, some processors should interrupt activities soon, resuming operations in early 2020. Besides, logistic issues also hampered new deals in the Brazilian spot market. Trading companies, in turn, were still marketing cotton for exports, reducing supply in Brazil even more. In general, some deals for delivery in the first months of 2020 – to both the domestic and the international markets – were closed.

 

Between November 29 and December 13, the CEPEA/ESALQ cotton Index, with payment in 8 days, dropped a slight 0.04%, closing at 2.6636 BRL (0.6486 USD) per pound on Dec. 13.

 

According to data from the BBM (Brazilian Commodity Exchange) tabulated by Cepea, at least 46.9% of the 2018/19 Brazilian crop (estimated by Conab at 2.73 million tons) may have been traded until December 10. Of this total, 46.1% were allocated to the Brazilian market, 39.4%, to the international market, and 14.5%, to flex contracts (exports with an option to the Brazilian market).

 

In Mato Grosso, data released by Imea on December 9 indicated that 92.97% of the 2018/19 crop – estimated at 1.95 million tons – may have been traded

 

CONAB – According to the third crop survey from Conab (National Company for Food Supply), released on Dec. 10, the area allocated to the Brazilian 2019/20 cotton crop is estimated at 1.64 million hectares, 1.6% larger than that in the previous season. On the other hand, the average productivity may decrease 1.6%, to 1,658 kilos per hectare. Thus, the Brazilian cotton output may remain stable, at 2.73 million tons. It is worth to consider that estimates to Mato Grosso and Bahia have remained stable compared to that reported in November – altogether, these two states produce 88% of the national cotton output.

 

EXPORTS AND IMPORTS IN NOVEMBER – After reaching a record in October/19, data from Secex indicate that Brazil exported 256.3 thousand tons of cotton in November (the second largest volume shipped by Brazil in all times), only 11.1% lower than that from the previous month (288.15 thousand tons), but 21% higher than the 211.75 thousand tons from Nov/18.

 

As regards imports, according to Secex, Brazil imported 14.2 tons of cotton in November, a steep 89.9% down compared to the volume purchased in October and 89.3% lower than that from Nov/18 (133.2 tons).

 

(Cepea-Brazil)

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