Cepea, July 2 2019 – Liquidity was low in the Brazilian cotton market in June. Agents from processing plants were not very interested in closing new deals, working with the cotton previously purchased through contracts and waiting for the harvesting to advance. Besides, some of these agents claimed that by-products sales were below the expected, which increased inventories.
Concerning sellers, many of them were willing to lower asking prices, despite the supply of the 2017/18 crop. As for the 2018/19 season, availability is low too, since processing is still slow. Thus, sellers were active in the spot market, aiming to replenish small amounts and/or acquire some product to deliver. Cotton growers claimed to have already sold large amounts of the 2018/19 crop.
In that scenario, deals for future delivery in both the domestic and the international markets, involving the cotton from the 2018/19 and the 2019/20 crops, were still low in June.
Between May 31 and June 28, the CEPEA/ESALQ cotton Index, with payment in 8 days, decreased 5.45%, closing at 2.7155 BRL per pound on June 28. The average Index in June, at 2.7944 BRL per pound, was 3.04% lower than that from May/19.
INTERNATIONAL MARKET – Data from the USDA released on June 11 indicated that the 2018/19 global production may total 25.88 million tons, 4% less than that from the previous season. Consumption is estimated at 26.63 million tons, slightly lower than that in the 2017/18 crop (26.71 million tons). While global trades are forecast to reach 9.8 million tons, 2018/19 global inventories should total 16.88 million, 4.2% less than that from the previous crop.
For the 2019/20 season, the second estimates from the USDA indicate production may reach 27.28 million tons, 5.4% higher than that in the previous crop. While production is expected to increase by 19.8% in the United States and by 3.9% in Pakistan, in Brazil, the output is forecast to decrease by 6.2% (2.6 million tons).
Global consumption in the 2019/20 season should increase 2.4%, to 27.3 million tons. Trades should total 9.7 million tons, with higher imports (5.4%) and exports (6.3%). Global inventories are forecast at 16.8 million tons, a slight 0.03% down compared to that in the previous crop – in China and India, inventories should decrease by 8.4% and by 2.6%, respectively. On the other hand, the USDA forecasts Brazilian inventories should increase 2.3% and American inventories, a staggering 37.6% in the United States.