Brazil's cotton sales resume gradually in January 2023

03 Feb '23

2 min read

Pic: Shutterstock

Brazilian cotton sales resumed in January 2023 and noted a gradual rise. As observed in 2022, agents reported difficulties in matching the prices and quality of the product, which affected liquidity in the spot market. In this scenario, the CEPEA/ESALQ Index for cotton stayed at around BRL 5.3/pound for the month of January.

As for demand, traders continued to prioritise the accomplishment of contracts. Some buyers were searching for higher-quality cotton, and some of were willing to pay higher prices to meet the specific requirements. It is important to highlight that agents from processors reported low demand along the entire textile chain, claiming difficulties to pass on the higher cotton prices to finished products, thus reducing purchases, the Sao Paulo-based Center for Advanced Studies on Applied Economics (CEPEA) said in its latest fortnightly report on the Brazilian cotton market.

Cotton farmers were unwilling to lower asking prices, majorly those who had made cash flow. Sellers were willing to reduce quotations only for lower-quality cotton. Some of them decided to wait for better deal opportunities with higher-quality cotton.

Between December 29 and January 31, the CEPEA/ESALQ Index for cotton increased by 0.14 per cent, to BRL 5.2561/pound. The average of the Index in January (BRL 5.3362/pound) was 0.3 per cent higher than that from Dec 2022 but 23.9 per cent lower than that in Jan 2022, in real terms (values were deflated by the IGP-DI from Dec 2022). Still, domestic prices were 17.7 per cent higher than the export parity value, on average, in January.

Early deals for the 2021-22 crop—for delivery in the coming months—were closed in late January. For exports, agents took advantage of the valuations of contracts at ICE Futures to fix prices. Sales of the current and the two coming crops were registered.

According to data from ABRAPA, the Brazilian Cotton Growers Association, 57.31 per cent of the 2022-23 cotton crop had been sown in Brazil by January 26.

Data released on January 27 by Cotton Outlook shows a decrease of 0.14 per cent in the world cotton production in the 2022-23 season to 24.862 million tons, 0.7 per cent down from that last crop. For Brazil, the 2022-23 output is estimated to be 13.5 per cent higher than that in the previous season, but data have been revised down by 0.9 per cent from that forecast in Dec 2022.

Fibre2Fashion News Desk (KD)

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