Low supply in the Brazilian spot market underpins prices in July

Cepea, August 3, 2020 – The harvesting of the 2019/20 cotton crop advanced in Brazil in July, but supply in the domestic spot market was still low, primarily of higher quality cotton. Growers were focused on the harvesting, on cotton processing, on closing new deals for exports – which, it is worth to mention, have been remunerating more than sales in the Brazilian spot market – and on the delivery of the product previously purchased, mainly to the international market. The few sellers in the spot were unwilling to lower asking prices.

 

Thus, despite the lower demand, purchasers had difficulties to find cotton within the required standards, which underpinned prices. Some processors were also waiting for a higher amount of cotton from the 2019/20 crop to be available in the market in order to close new deals. Trading companies, in turn, continued to purchase cotton from the 2019/20 and the 2020/21 seasons. Between June 30 and July 31, the CEPEA/ESALQ Index for cotton rose by 5.32%, closing at 2.855 BRL per pound on July 31. Between July 1st and 31.

 

CROPS – According to Abrapa (Brazilian Cotton Producers Association), the harvesting of the 2019/20 cotton crop had reached 30% of the area until July 23. In Mato Grosso, activities had reached 26% of the expected output, and in Bahia, 29%. In Goiás, the harvesting had reached 51%; in Minas Gerais, 47%; in Mato Grosso do Sul, 72%; in Maranhão, 35%; in Piauí, 58%; in São Paulo, 95%; in Tocantins, 29%; and in Paraná, 99%.

 

(Cepea-Brazil)

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