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Demand surges for cotton in Brazil. Prices firm up
18
Dec '12
Cotton prices continued firm in Brazil in early December, underpinned by the interest from purchasers and refrained sellers. The CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, 8-day payment) moved up 1.26% in the partial of November (October 31 – November 16), averaging 1.5867 real (0.7599 dollar) per pound on Dec. 17.

Some processors are concerned with the availability of the product in the upcoming days and early 2013. Many sellers, in turn, expect new price rises, while others prefer to postpone trades for the end of 2012. Higher prices in the international market also underpin quotes in Brazil.

Agents are surprised by the heated demand in this period of the year. Liquidity usually reduces due to the nearness of the end-of-year holidays, but low stocks of the industry and fears regarding the product availability in the first semester of 2013 have increased the pace of trades. The planted area may shrink in the 2012/13 crop in Brazil and in the 2013/14 season in the world. As a result, players are focused on the demand from China and other important importers.

In Brazil, Conab (National Company for Food Supply) forecasts the planted area in 2012/13 to total a little more than 1 million hectares, for a sharp decrease of 28% in relation to the previous crop. However, the yield might increase 8.7%, to 1,464 kilos per hectare. In Mato Grosso state, major Brazilian producer, the initial forecast is to harvest 1,425 kilos per hectare, which would represent a decrease of 1.2% in the yield compared to the crop before.

Based on estimates of planted area and yield, Conab indicates that the Brazilian harvest will total 1.47 million tons, dropping 21.8% in relation to the season before. It is enough to meet the domestic demand; however, exports would be capped.

For the time being, Conab estimates the domestic consumption to be stable for the third year in a row, at 880 thousand tons. Exports would drop due to the lower domestic surplus, at 680 thousand tons in the 2012/13 season – for the current crop (2011/12), exports are expected to surpass 1 million tons.

Regarding the product from the 2011/12 crop, in November, Brazil shipped 122.6 thousand tons, generating revenue of 251.5 million dollars. In 2012, Brazil has exported 942.1 thousand tons, 45.7% more than in the first 11 months of 2011. 

CEPEA

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