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Liquidity still low in cotton market due to international scenario
05
Oct '11
In late September, liquidity remained low in the Brazilian cotton market, as a result of price oscillations in the international market and of the exchange rate. Exports were still more profitable; however, uncertainties in the international market have brought concerns to the sector.

Trades in the cotton market have kept the sluggish pace for months. Price oscillations after the record high in the first trimester of 2011 have refrained purchasers, mainly, in the spot market.

However, in late September, cotton quotes in the Brazilian market upped, influenced by higher price levels in the international market in relation to August and by the devaluation of real against the dollar. The Center for Advanced Studies on Applied Economics (CEPEA)/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) upped 1.84% in the accumulated of the month (between Aug. 31 to Sept. 30), and closed at 1.8378 real or 0.9775 dollar per pound on Sept. 30.

For the 2011/12 season, Icac (International Cotton Advisory Committee) indicates that world imports of cotton will grow 4%, to 8 million tons. Brazil and Australia may step up exports due to a sharp increase in their production.

Considering the 2010/11 crop, Conab (National Company for Food Supply) indicated, on Sept. 9, that the area is 1.4 million hectares, 67.6% larger compared to the last year-crop. The yield is forecast to be 1,398 kilos per hectare, 2.2% lower than in the 2009/10 season. As a result, the Brazilian production might increase 64%, to 1.96 million tons.

CEPEA - Center for Advanced Studies on Applied Economics

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