Purchasers continue away from the market, and Index drops by 6% in the 1st fortnight

Cepea, September 16, 2020 – Agents from many Brazilian cotton processors have been away from the market, not purchasing new batches and lowering liquidity in the domestic market. Most purchasers are focused on processing the cotton from the 2019/20 crop and on the possible supply increase in the Brazilian market. A few purchasers have closed deals for small volumes.


This scenario is pressing down cotton prices in the Brazilian market. Between August 31 and September 15, the CEPEA/ESALQ Index for cotton decreased by 6.1%, closing at 3.1095 BRL per pound on September 15. However, the average Index in September (until Sept. 15) closed at 3.1876 BRL per pound, 3% higher than that in August/20.


In the first fortnight of September, many cotton farmers were focused on the harvesting and delivering the product previously purchased, however, those with cash flow needs ended up lowering asking prices. Some farmers are prioritizing sales of soybean and/or corn. Thus, the number of deals has been low this month.


According to Abrapa (Brazilian Cotton Producers Association), the harvesting of the 2019/20 crop has ended. Until Sept. 10, 42% of the output had been processed. In Mato Grosso and in Bahia, 36% and 53% of the crop had been processed.


CONAB – A report released by Conab (Brazil’s National Company for Food Supply) on September 10 revised down by 0.31% the area sown with cotton in Brazil in the 2019/20 season, to 1.67 million hectares. Favorable weather increased productivity estimates by 0.38% between August and September, to 1,760 kilos per hectare. The output was revised up by a slight 0.07%, to 2.93 million tons. Compared to the previous season, area, productivity and production are estimated to be 2.9%, 1.3% and 4.2% higher, respectively.


In Mato Grosso, estimates for the area sown with cotton has remained stable from August to September, at 1.17 million hectares, but forecasts point to a 6.7% decrease compared to that last season. Productivity estimates were revised up by 0.5% compared to that reported in August, at 1,756 kilos per hectare, 5.7% higher than that in the 2018/19 season. Production, in turn, was revised up by 0.51%, to 2.05 million tons, 8% higher than that in the previous season.


For Bahia, area is forecast at 313.7 thousand hectares, productivity, at 1,842 kilos per hectares and the output at 577.8 thousand tons. Compared to the previous season, these estimates are 5.5% smaller, 2.3% higher and 8.5% lower, respectively.





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