Liquidity increases in Brazil, but quotes oscillate

Cepea, September 17 2019 – Higher demand from the cotton processing plants from southern, southeastern and northeastern Brazil slightly increased the trading pace for cotton in the domestic market in the first fortnight of September. In the spot market, however, the number of deals closed was low, since many growers and trading companies were focused on the accomplishment of contracts. Besides, many farmers were focused on the harvesting and processing of cotton. Traders, in turn, were purchasing cotton to deliver.


In this scenario, purchasers were either more willing to pay higher prices for the product, or sellers lowered asking prices, leading the daily averages to oscillate. In general, however, sellers were not so willing to lower asking prices, mainly for higher quality batches.


Thus, between August 30 and September 15, the CEPEA/ESALQ cotton Index, with payment in 8 days, remained stable (-0.17%), closing at 2.4656 BRL per pound on September 13.


FIELD – Data from Imea released on September 6 indicated that the harvesting in Mato Grosso has reached 98.5% of the total area estimated for the state (1.072 million hectares).


In a report released by Conab (National Company for Food Supply) on September 10, the production estimates for the Brazilian 2018/19 cotton crop were revised up again, now to 2.726 million tons (+1.3% compared to that previously reported), 35.9% up compared to that in the previous season. Higher supply is linked to the increases in both the area sown – by 0.5%, to 1.618 million hectares – and productivity – by 0.8%, to 1,685 kilos of cotton per hectare –, compared to that reported in August/19.


In Mato Grosso, the volume to be harvested is estimated at 1.816 million tons, 1.9% up compared to that previously reported and 40.7% larger than that in the 2017/18 crop. Still according to Conab, the average productivity in MT is now forecast at 1,662 kilos of cotton per hectare. In Bahia, harvest estimates have been kept stable, at 597.6 thousand tons, but 19.9% higher than that in the 2017/18 crop.


EXPORTS AND IMPORTS – Data from Secex indicate that, in August/19, Brazil exported 46.5 thousand tons of cotton, 11.6% less than that shipped in July/19 (47 thousand tons), but a staggering 71.2% higher than the 24.2 thousand tons exported in August/18. This year (January to August), the volume exported has totaled 622.3 thousand tons, more than two-fold that from the same period last year (269.5 thousand tons). In the last 12 months, Brazil exported 1.33 million tons of cotton, a record.


Concerning cotton imports, Brazil purchased 61.7 tons of cotton from the international market in August/19, 80.9% down compared to the volume acquired in July and 93% less than that purchased in August/18 (886.4 tons).


INTERNATIONAL MARKET – In a report released on September 3, Icac (International Cotton Advisory Committee) estimated the global 2019/20 production to total 26.89 million tons, 5% up compared to that in the previous season (25.72 million tons) – nearly 43% will be produced in China and India altogether.


Global consumption should grow by 1.2% in the 2019/20 crop, to 26.66 million tons, and exports may increase 2%, to 9.48 million tons. Global inventories may total 18.33 million tons in 19/20, 1.3% higher than that in 2018/19.




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