Brazil cotton prices dip below govt floor price

07 Aug '14

2 min read

Due to the 11% decrease of cotton prices in July, now, all regions in Brazil register price levels below the government’s price floor, which would justify the intervention of the Brazilian government for trading and keeping producers’ revenue. However, there are still no perspectives about this.

The CEPEA/ESALQ Index for cotton type 41-4 closed at 1.6942 real (0.7463 dollar) per pound on July 31. Domestic price drops are attributed to smallest values of the index for Cotlook A and contracts at ICE Futures.

Considering the consumption, Icac’s (International Cotton Advisory Committee) report released on August 1 indicated that, due to similar prices between cotton and polyester, the global cotton consumption might increase 5%, to 24.5 million tons in the 2014/15 crop.

In regional terms, Icac estimates that the Asian consumption might increase significantly in 2014/15, led by China, upping 5%, at 7.9 million tons. In India, an increase of 6% is expected, at 5.4 million tons, while for the rest of the continent, the consumption is forecasted to move up 8%.

For the 2014/15 crop, weather conditions are favoring the crops’ development in major producing countries, which might keep the availability high.

The index for Cotlook A, between July 28 and August 1, dropped 4.8% compared to the next week (July 21-25). In the same period, the dollar average rose 1.15%. The export parity calculated by Cepea FAS (Free Alongside Ship) Paranaguá port averaged 1.4939 real per pound, downing 4.4% compared to the previous.

In Brazil, trades involving small batches are still prevalent. Roughly 60% of the 2013/14 Brazilian crop is already traded, and producers are focused on accomplishing contracts. This fact also limits the need of immediate purchases from the industry.

CEPEA

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