Low supply pushes up cotton prices in Brazilian market

By July 15, approximately 10 per cent of the cotton area in Brazil was harvested. However, all the cotton didn't immediately come to the spot market, as the produce needs to be processed and classified before it is put for sale.

Secondly, a significant share of the production has already been traded, mainly for export. Hence, the first batches of cotton were allocated to accomplish these contracts.

Thirdly, high dollar quotes which increases export, also kept many sellers away from the spot market. And the ones operating asked for higher prices during the first fortnight of July. So, buyers having immediate needs had to pay higher values to close trades, according to the CEPEA report.

Meanwhile, a report released by Brazil's national supply company Conab indicated that the area under cotton in 2020-21 may total 1.37 million hectares, around 17.9 per cent less compared to the previous year. The report forecast productivity (yield per hectare) at 1,713 kilos per hectare, showing a decrease of 4.9 per cent. So, total crop is expected to be 2.342 million tons, down 22 per cent compared to 2019-20.

Due to lower supply, Brazil's domestic consumption of cotton is likely to decrease by 19.2 per cent compared to the previous year, at 715,000 tons. Exports are also likely to decline by 5.6 per cent compared to the 2019-20 season, to approximately 2 million tons. Ending stocks are projected by Conab to shrink 21.4 per cent compared to the previous season.

Fibre2Fashion News Desk (RKS)