Liquidity remains low in Brazilian cotton market

08 Nov '12

1 min read

Center for Advanced Studies on Applied Economics (CEPEA) reported that due to the holiday of the All Soul’s Day in Brazil on November 2, and the low liquidity in previous weeks, most players continued refrained from closing new trades in the Brazilian cotton market in late October. Despite low liquidity, supply was capped in the period because producers prefer to trade only in the off-season period. Producers continued firm regarding asking prices and were focused on the accomplishment of contracts.

Several processing companies have inventories until the year end and, therefore, were unwilling to close prompt-delivery trades, giving preference to trades for delivery after January 2013.

In October, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) decreased 0.73% and closed at 1.5673 real or 0.7720 dollar per pound on Oct. 31.

The monthly average of the index compared to international prices may explain why sellers were refrained. While the Index dropped 6%, in Reais and in dollar, averaging 0.7592 dollar per pound (for immediate payment), the index for Cotlook A averaged 0.8196 dollar per pound, for a decrease of 2.6%, and the first contract at ICE Futures averaged 0.7253 dollar per pound, dropping 1%.

Center for Advanced Studies on Applied Economics (CEPEA)

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