Cepea, February 19, 2021 – Cotton prices continued to set new nominal records in the Brazilian market in the first fortnight of February, however, the upward trend of prices weakened in the second week of the month, since the gap between domestic prices and the export parity widened, driving purchasers away from the national spot market and making sellers slightly more willing to lower asking prices, even those focused on the accomplishment of contracts to the international market.
Prices rose more sharply in the first weeks of 2021, when international quotes were on the rise and purchasers were more interested in closing deals. In the second semester of 2020, the CEPEA/ESALQ Index for cotton rose by 40%, while this year (from Dec. 30, 2020 to Feb. 12, 2021), it has increased by 25%, closing at 4.7612 BRL per pound on Feb. 12, the highest nominal level in the series of Cepea for this product, which began in July 1996. Between January 29 and February 12, this Index rose by 4.2%, 11.6% up from the export parity, on average.
Domestic liquidity has been lower this month, with deals for prompt delivery prevailing in the national spot market – agents from processors are concerned about passing on cotton price rises to by-products. Still, the volume supplied in the first fortnight of February continued lower than demand. Most Brazilian cotton farmers have already sold large volumes of the total output, and new contracts are being closed for delivery to both the domestic and the international markets, for the cotton from the previous (2019/20), the current (2020/21) and the coming (2021/22) seasons.
SOWING OF THE 2020/21 CROP – Abrapa (Brazilian Cotton Producers Association) has released that, up to February 4, cotton sowing in the 2020/21 season had reached 70% of the estimated area. In Bahia, activities have reached 95% of the area; in Mato Grosso, 60%; in Goiás, 96%; in Minas Gerais, 88%; in Mato Grosso do Sul, 99%; in São Paulo, 99%; and in Tocantins, 95%. In the states of Piauí, Maranhão and Paraná, cotton sowing has ended.
In Mato Grosso, the delay in the soybean harvesting is concerning agents, since it may also delay sowing of the second crop cotton. According to Imea, up to February 5, 11.2% of the soybean area had been harvested in MT, against 44.51% in the same period of 2020 and 32.53% on the average of the last five years.
PHYSICAL PRODUCTION – Despite the increases in all segments in the monthly comparison, the covid-19 pandemic influenced results in 2020. Data from the IBGE (Brazilian Institute of Geography and Statistics) indicate that, from November to December 2020 (most recent data available), industrial activity (with seasonal adjustment) increased for the seventh consecutive month, by 15.4% in manufacture of textile products and by 11.5% in manufacture of clothing and accessories. However, comparing 2020 to 2019, these activities decreased by 6.6% and by 23.7%, respectively.
Only the sector of “preparation and spinning of textile fibers” increased in 2020, by a slight 1.2% compared to that in 2019. On the other hand, the segment of “weaving, except cotton fabric” decreased by 8.1%, and the “manufacture of cotton fabric”, by 7.8% in 2020, compared to that in 2019. In the same comparison, “manufacture of textile artefacts, except clothing” decreased by 8.9%, and the segment of “manufacture of cotton fabric and knitting”, by a steep 26.9%.