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Low supply of high-quality cotton increases prices
18
Nov '11
Brazilian cotton prices have been moving up over the last days. At the beginning of the last week, purchasers were refrained. The supply of high-quality cotton, however, is limited in the market. So, purchasers in need of the high-quality product have to pay higher prices.

Sellers keep firm in their asking prices, and they are focused on the contracts to export. In general terms, Brazilian trades are slow. The difference between asking and bidding prices is bump in the road.

Between November 7-14, 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) moved up 2.15%, closing at 1.6973 real or 0.9740 dollar per pound on Nov. 14.

The index for Cotlook A decreased 2.63% during Nov. 8-15, and closed at 1.056 dollar per pound. The dollar valuated 1.52% against the Real, averaging 1.7526 last week (Nov. 7-11). The export parity calculated by Cepea, FOB Paranaguá, averaged 1.6249 real per pound, and moved down 1.17% comparing to the average of previous period (1.6441 real per pound).

Conab (National Company for Food Supply – Brazil) estimates that the planted area for the 2011/12 season in Brazil should be, on average, 1.479 million hectares, an increase of 5.6% in relation to the previous crop. Conab data indicate that the Brazilian production may total, on average, 2.1 million tons, 7.12% higher than the previous crop (2010/11).

Data from Icac (International Cotton Advisory Committee) indicate that the world production from the 2011/12 season might increase 8%, to 26.9 million tons, due to a larger area cultivated in this crop. The consumption should keep stable, in 24.6 million tons, because of a probable lower world economic growth, which might limit the cotton demand. In this context, ending stocks would increase, totaling 11.3 million tons at the end of the 2011/12 crop – in the previous crop, the ending stocks were 9.1 million tons.

Regarding exports, according to data from Secex (Foreign Trade Secretariat), Brazil shipped 176.6 thousand tons of cotton in October 2011, the largest volume ever exported by Brazil in a single month, considering the Secex data. This quantity was 24.3% higher than in September 2011 and 88.8% more than in October 2010. In the accumulated of this year (January-October), Brazilian exports have totaled 510 million tons, a record.

CEPEA - Center for Advanced Studies on Applied Economics


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