Lower export parity presses down quotes in Brazil

Cepea, November 17, 2020 – Cotton prices dropped in the Brazilian market in the first fortnight of November, after the sharp rises registered in October.


This month, the dollar depreciation against Real reduced the export parity and, consequently, prices in Brazil – on the first days of November, domestic quotes were almost 10% higher than export parity. Besides, purchasers left the market – not only because of this scenario, but also because of the sharp valuations in October –, which helped to press down quotes. Sellers, however, were more interested in closing deals.


Between October 30 and November 13, the CEPEA/ESALQ Index for cotton dropped by 6.05%, to 3.8107 BRL/pound on Nov. 13. In that same period, the dollar decreased by 4.7%, to 5.477 BRL on Nov. 13. The dollar depreciation is linked to the higher optimism about the presidential election in the United States.


CROPS – Data from Abrapa indica that, until November 5th, processing of the cotton from the 2019/20 season had reached 79% of the output. In Mato Grosso, processing was at 74%, and in Bahia, at 90%.


CONAB – Data from Conab (Brazil’s National Company for Food Supply) released on Nov. 10th indicate that the cotton area in the 2020/21 season should total 1.57 million hectares, 2.8% smaller than that reported in October and 5.8% down compared to that in the 2019/20 season (1.67 million hectares).


Productivity in the 2019/20 season was revised up by 1.73%, to 1,802 kilograms per hectare; for the 2020/21 season, estimates were kept at 1,744 kg/hectare. The output in the 2019/20 season was kept at 3 million tons, while estimates for the 2020/21 were revised down by 2.79% compared to that reported last month, to 2.7 million tons.


For the 2020/21 season, the area in Mato Grosso is expected to be 1.4% smaller, and in Bahia, 5.9% smaller, at 1.15 million hectares and 251 thousand hectares, respectively. The output is estimated to be lower in both states, at 2 million tons in MT and at 455.3 thousand tons in BA. Productivity was kept at 1,750 kg/hectare in MT and at 1,814 kg/hectare in BA.





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