Sellers prioritize exports, limit supply in the Brazilian spot market and lower domestic liquidity

Cepea, December 1, 2020 – The oscillations in the export parity, influenced by the variations of both international prices and the currency exchange rate, and the uncertainties about the market dynamics in the coming months made Brazilian agents cautious about closing deals in November.


On the one hand, sellers prioritized exports, although prices were slightly lower than that in the domestic market, making only a few batches available in the Brazilian spot. On the other hand, purchasers were still receiving the cotton acquired in previous weeks, and some of these agents signaled a halt in production in some periods of December, despite the fast sales pace.


Between Oct. 30 and Nov. 30, the CEPEA/ESALQ Index for cotton dropped by 1.3%, closing at 4.0023 BRL/pound on Nov. 30. The average in November closed at 3.9032 BRL/pound, the highest, in nominal terms, in all Cepea series.


As regards cotton exports, until the third week of November, Brazil had exported 249.27 thousand tons of the product, against 256.5 thousand tons in Nov/19. The average export value in that period was 3.7069 BRL/pound, considering the average dollar at 5.4489 BRL. With agents focused on exports, only a few batches were made available in the Brazilian spot market.


2019/20 SEASON – According to Abrapa, cotton processing in the 2019/20 season had reached 87% of the Brazilian output until Nov. 19. In Mato Grosso, 85% of the output has been processed, and in Bahia, 93%.


2020/21 SEASON – Cotton farmers from the Brazilian Cerrado were beginning to focus on sowing the new crop. The initial delay in soybean sowing concerned farmers, but the attractive profitability observed in the last months should result in a slighter area reduction compared to the expected.


Until the end of November, sellers did not seem very interested in closing deals, but agents from some processors wanted to close deals for delivery in the first quarter of 2021.




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