Firm demand propels Brazilian cotton prices

06 Feb '13

2 min read

At the end of the month, cotton quotes continued to increase in the Brazilian market, still influenced by firm demand from the industry. Moreover, liquidity was good in the period. However, the interest was only in small volumes, while purchasers were evaluating whether prices will remain firm.

Exports moved at a slow pace in January, which would indicate availability in the domestic market. However, price recovery in the international market in late January, due to the good demand for the product from the USA and India, may lead Brazilian sellers to continue firm.

In Brazil, consecutive price highs were leading the industry to refrain from trading. In late January, some processors preferred to reduce production to ensure stocks until the new cotton crop.

Producers, in turn, continue firm regarding asking prices, and, in some cases, they show no interest in selling. Players from Mato Grosso State, for example, were selling soybean as an alternative to make cash flow, reducing the need to sell cotton. Moreover, expecting new price rises, producers postpone trades of the high-quality cotton to obtain better prices. In general, they were offering only batches of low quality cotton.

In January, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) increased 15.86% and closed at 1.8422 real or 0.9271 dollar per pound on Jan. 31.

Center for Advanced Studies on Applied Economics (CEPEA)

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