Purchasers put pressure, and cotton quotes drop in Brazil in May

Cepea, June 1st – Cotton prices faded in the Brazilian market in May, influenced by the pressure of purchasers, who bid lower prices for the product in the spot market, claiming low liquidity in the market of finished products. While some sellers agreed to lower asking prices, many farmers did not, staying away from the market. Traders were purchasing cotton to accomplish contracts.

 

In this scenario, the trading pace for cotton was slow in Brazil in May. Between April 30 and May 31, the CEPEA/ESALQ Index for cotton dropped by 2.5%, to 5.0412 BRL/pound on May 31.

 

As regards term contracts for the 2020/21 season, sales were high in May, since Brazilian processors aim to have raw-material in the coming months – as exports have been fast, supply from the 2020/21 crop is low, and high amounts have already been sold. Agents from some trading companies were interested in closing deals, majorly for sale.

 

TRADES – According to data from the BBM (Brazilian Commodity Exchange) tabulated by Cepea, at least 45% of the 2019/20 Brazilian cotton crop and 29% of the 2020/21 crop may have been traded until April 25. Considering that in the last five seasons 74% of the Brazilian cotton output was registered, 61% of the current production and 39% of the next may have been sold.

 

EXPORTS – In the first 15 working days of May, Brazil exported 81.6 thousand tons of cotton, according to data from Secex, 17.3% more than the amount shipped in May/20. In that period, the daily average of shipments was at 5.4 thousand tons, much higher than the 3.48 thousand tons/day in May/20. From August/20 to May/21, Brazil exported 2.2 million tons of cotton, a record. In 12 months, shipments totaled 2.34 million tons, also a record.

 

CONAB – In a report released on May 12, Conab (Brazil’s National Company for Food Supply) estimated the Brazilian cotton area to total 1.38 million hectares in the 2020/21 season, 17.2% down from that in 2019/20. Productivity is forecast at 1,771 kilos per hectare, 1.7% lower than that in the previous season. As a result, production should total 2.442 million tons, 18.6% down from that in the 2019/20 season. It is worth to consider that, since the first report released by Conab, in October/20, the estimates for the 2020/21 production have decreased by 13.3%, pressed down by the 14.6% decrease in area. Conab estimates the domestic availability (initial inventories + production estimates) to total 4.208 million tons.

 

(Cepea-Brazil)

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