Prices drop in the first fortnight and liquidity increases in Brazil

Cepea, July 18 2019 – Liquidity was higher in the Brazilian cotton market in the first fortnight of July. As processing advanced, more cotton batches from the 2018/19 crop were supplied in the spot, making sellers more willing to lower asking prices.


In that scenario, between June 28 and July 15, the CEPEA/ESALQ cotton Index, with payment in 8 days, dropped 2.2%, closing at 2.6557 BRL per pound on July 15. The price average in the first half of the month, at 2.7032 BRL per pound, is 3.26% lower than that in June/19 and 25.15% below that in July/18.


As for the 2018/19 harvest, data from Imea released on July 12 indicated that activities have reached 7.15% of the area in Mato Grosso.


In general, agents from processing plants were away from the market. Some of them were working with the product stocked, waiting for the cotton previously purchased to be delivered, while others only bought small amounts to replenish inventories. Traders and stockbrokers, however, were more active, trading batches from both the 2017/18 and the 201819 seasons for prompt delivery.


Concerning sellers, cotton farmers were out of the market, focused on the harvesting and cotton processing. Others supplied batches remaining from the previous crop to make cash flow, making available batches from the new season. However, disagreements about quality and price limited trades. Agents claimed that several batches, even from the new season, have lower quality.


On its 10th crop survey, released on July 11, Conab revised down (by 0.41%) production estimates for the 2018/19 – compared to that reported in June –, to 2.665 million tons, which, in turn, is 32.9% higher than that in the previous crop, due to the 36.2% area increase (1.6 million hectares). The average productivity, in turn, decreased 0.48% compared to that reported in June and 2.5% compared to that in the 2017/18 season, to 1,665 kilos per hectare.


In Mato Grosso, although the average productivity may decrease by 1.1%, to 1,641 kilos per hectare, the amount to be harvested is forecast at 1.64 million tons, 36.8% up compared to the 2017/18 crop. Bahia, in turn, may harvest 583.7 thousand tons of cotton, 17.1% more than in 17/18. Despite the sharp area increase (+25.9%), the average productivity may decrease 7%, to 1,758 kilos per hectare.


EXPORTS – Brazilian cotton exports continue to reach new records. Secex data indicate that, in the current season (from August/18 to June/19), shipments have totaled 1.262 million tons, surpassing the record from 2011/12. In June, cotton exports totaled 61.6 thousand tons, higher than the 8.8 thousand tons shipped in the same period of 2018 and the largest volume exported in a month of June since 1996.




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