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Cotton production in São Paulo impacted by dry weather
20
Mar '12
On March 9, India announced that the halt of cotton exports was reviewed – on March 2, the Indian government announced an entire halt of shipments – to aim at the domestic market.

Agents of the producing sector claim that they might have problems with domestic market players, therefore, the Indian government conceded and announced that exports are allowed, but only for the product traded until March 4. If the halt of all exports continues, agents expect price increases.

At the beginning of March, the announcement of the halt led international prices to soar. At some moments, the international increase pushed up values in the Brazilian market. The announcement, on balance, reduced liquidity in Brazil, which was observed in the international scenario as well.

Despite the fact that the supply is surpassing the demand in the world terms in the 2012/13 season, the Indian export restriction would leave only a few options for importers.

According to the USDA, players expect exports to total 1.7 million cotton tons in the 2011/12 crop. Without the Indian share, only Brazil and Australia would be in a position to increase shipments, but they would total between 450 and 500 thousand tons, way below the necessary to meet the demand of India.

The solution may be a decrease of China's imports forecast to 4 million tons this season.

Between Feb. 29 and March 15, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) dropped 3.04%, closing at 1.5793 real or 0.8784 dollar per pound on March. 15.

As for the supply and demand in Brazil, data from Conab released on March 8, indicated that the planted area in the 2011/12 crop may be 0.2% higher than the previous, totaling 1.4 million hectares. The Brazilian production might amount 2 million tons, volume 2.1% more than that in the 2010/11 crop.

As for cotton crops, the lack of rains remained affecting the development of part of crops in the north of Minas Gerais state, in the Triângulo Mineiro region and in the western region of Bahia. In São Paulo, there will be losses in the production because of the dry weather.

Center for Advanced Studies on Applied Economics (CEPEA) is a research center of the University of São Paulo located at ESALQ in Piracicaba, State of São Paulo.

Center for Advanced Studies on Applied Economics (CEPEA)

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