Liquidity is still low, and prices remain stable in the first half of June

Cepea, June 17, 2020 – Cotton prices have been stable in the Brazilian market for almost a month. Since the first fortnight of April, domestic quotes have been lower than the exports parity, which is not common for the period. This means that exports have been remunerating much more than sales in Brazil, although liquidity has been low in both the domestic and the international markets.


On the one hand, purchasers have been buying cotton only to replenish inventories, still trying to extend payment deadlines though. On the other hand, the strong dollar increases the exports parity, making sellers unwilling to lower asking prices in Brazil.


CROPS – The harvesting of the new crop was stepping up in Brazil in the first fortnight of June, which means that supply in the market should increase soon. However, the first batches available are allocated to the accomplishment of contracts, primarily for exports. The interest from Asian processors, mainly in China, seems to have increased.


Between May 29 and June 15, the CEPEA/ESALQ cotton Index, with payment in 8 days, rose by a slight 0.31%, closing at 2.7150 BRL per pound on June 15. The monthly average (until June 15), at 2.7098 BRL per pound, was 2.33% higher than that in May/20, but 3% lower than that in June/19, in real terms (values were deflated by the IGP-DI from May/20).


USDA – Data from the USDA released on June 11 indicate that the world 2019/20 cotton output should total 26.8 million tons, 3.6% higher than the previous. Consumption, however, was revised down for one more month, by 2.2% compared to that previously reported and by 14.7% compared to that in the 2018/19 season, to 22.4 million tons, the lowest since the 2003/2004 season.




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