Trading pace slows down in Brazil and prices drop

Cepea, March 18, 2020 – After having closed some deals in the first week of March, agents drove away from the Brazilian cotton market, primarily purchasers. These agents are aware of the US dollar appreciation against Real and the contracts oscillations at the New York Stock Exchange (ICE Futures). Besides, the gap between price and quality hampered deals in the Brazilian spot market.


Thus, lower demand pressed down cotton quotes in Brazil in the first half of March, although some sellers were unwilling to lower asking prices, primarily for higher quality cotton. Between February 28 and March 13, the CEPEA/ESALQ cotton Index, with payment in 8 days, dropped 0.8%, closing at 2.9015 BRL per pound on March 13.


Most processors have been working with the cotton previously stocked and/or received through contracts. Trading companies, in turn, are concerned about exports, due to the scenario at some foreigner ports – because of the coronavirus outbreak worldwide – and the possible lower return of containers.


USDA – Data from the USDA released on March 11 estimate the world cotton production to total 26.5 million tons in the 2019/20 season, 2.5% up compared to that from 2018/19. Brazil ranks as number four in terms of production in the 2019/20 season – the country should produce 2.83 million tons of cotton, stable compared to that in the previous crop and 2.4% up compared to that estimated in February.


Global consumption should be 1.8% lower than that in the 2018/19 crop, at 25.7 million tons – this result is linked to the 7.6% decrease in the Chinese consumption. Ending stocks may total 18.2 million tons, 4% up compared to that in the previous crop. The USDA estimates China’s inventories to be 3.3% lower in the 2019/20 crop, while in Brazil, India and the United States, inventories should be 6.7%, 39.7% and 5.1% higher, respectively.


Globally, cotton imports are forecast to increase by 2.5% in the 2019/20 crop (to 9.49 million tons), and exports, by 5.4% (to 9.49 million tons).




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