The Conab (National Company for Food Supply) forecasts the Brazilian cotton 2006/07 crop at 1.4 million tons, a record volume. The higher production is related to the larger cotton supply in the Center-Western and Northeast regions, where planting area increased expressively and the productivity should be between 6 and 9 percent higher than those from the 2005/06 crop.
Regarding the domestic prices, they kept moving down, even with the off-season period. Besides the import parity, the pressure comes from the valuation of the Real against the dollar and the decreasing international values. The estimate of a record production in Brazil is also a reason for the downward trend. Between Feb 28th and Mar 15th, the CEPEA/ESALQ Index decreased 3.24 percent in Real and 1.8 percent in dollar, closing the period at 1.3694 real or 0.6498 dollar a pound.
According to the International Cotton Advisory Committee (ICAC), the 2006/07 cotton global crop production should total 25.3 million tons, inferior to the consumption, that should total 26 million. In this context, stocks probably will reduce, boosting the average prices, from 0.5615 dollar per pound in the 2005/06 crop to 0.59 dollar a pound in the 2006/07 crop, raise of 5 percent.