With flexible sellers and low buying interest, prices drop in BR

Cepea, June 19 2019 – Although some sellers were more willing to lower asking prices, processing plants were bidding even lower quotes, hampering cotton trades in Brazil in the first fortnight of June. Besides, purchasers still claimed difficulty to find cotton with the desired quality.


In general, purchasers were retracted from the spot market, due to expectations for a large 2018/19 crop and consequent lower quotes. These agents were working with the cotton stocked or previously purchased through contracts closed in the 2017/18 season.


As for sellers, trading companies were more flexible regarding prices, due to the decreases for both future contracts at the New York Stock Exchange (ICE Futures) and the US dollar. In the first week of June, the average cotton price in the Brazilian market was only 6.3% higher than the exports parity price.


Thus, after dropping 2.58% in May, between May 31 and June 14, the CEPEA/ESALQ cotton Index, with payment in 8 days, decreased 2.1%, closing at 2.8124 BRL per pound on June 14.


Brazilian cotton growers seem to have already sold large amounts of the 2018/19 crop and, thus, were focused on the development of the crop and waiting for the harvesting to start – or advance. According to Cepea collaborators, lower temperatures should delay maturation and, consequently, the harvesting of the 2018/19 crop in some areas from Mato Grosso and Bahia. Rains in some areas in previous months may also hamper fieldwork.


As for future trades, international price drops reduced the number of deals for the two next seasons (2018/19 and 2019/20) – some agents have been away from the market since late May.


Conab’s (National Company for Food Supply) ninth crop survey released on June 11 revised up the output expected for the 2018/19 season, to 2.67 million tons, 33.4% larger than the previous. Higher production estimates are linked to the increase in the area to be sown, by 36.2%, since the average productivity decreased a slight 2%, at 1,673 kilos per hectare.


The output from Mato Grosso is estimated at 1.76 million tons, 36.8% up compared to that from the 2017/18 crop, despite the slight 1.1% decrease in the average productivity, to 1,641 kilos per hectare. In Bahia, the output is predicted at 587.6 thousand tons, 17.9% up – this increase is also linked to the larger area to be sown (+35.9%), since the average productivity may be at 1,770 kilos per hectare (-6.3%).


EXPORTS AND IMPORTS – Data from Secex indicate that, in May/19, Brazil exported 82.3 thousand tons of cotton, 11.7% more than the amount shipped in April/19 (73.7 thousand tons) and a staggering 345% up compared to the 18.5 thousand tons exported in May/18. Between August/18 and May/19, Brazil shipped the record volume of 1.2 million tons of cotton. Revenue in May totaled 140 million USD, 11.5% higher than that from April/19 and four-fold that from April/18 (33.8 million USD).


As for cotton imports, Brazil purchased 262.2 tons of cotton from the international market in May/19, according to Secex, two-fold the 121.5 tons from April, but 87.3% less than that from May/18 (2.057 thousand tons).





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