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Brazilian cotton prices fall in early April
Apr '13
Brazilian cotton prices downed in early April, due to the low demand. This weakness in the demand is linked to the increase of domestic prices that is higher than in the international market, to the possibility of import and to the difficulty of textile mills to transfer price highs to cotton yarn.

From March 28 to April 15, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo City, 8-day payment) downed 2.91%, averaging 2.1061 reais (1.056 dollar) per pound on April 15.

Even without an immediately effect in the Brazilian market, the possibility of North American producers increase the cotton area starts to be considered by the market. The sharply decrease in corn prices and increases in cotton values are the reasons to enlarge the cotton cropped areas in the USA.

In Brazil, liquidity reduced in the second week of April, but, for a while, there were no data showing something that should change the movement of prices. Besides the lower cultivated area in Brazil, producers were expecting smaller yield in relation to the previous crop, due to the unfavorable weather and pest attacks.

Still, purchasers were unwilling to trade. These agents were waiting for a downward trend in cotton prices and expect the exemption of TEC (Common External Tariff).

In the Triângulo Mineiro and Northeastern Brazilian regions, caterpillar and pest attacked were hindrance of producers. In the North of Minas Gerais state, the drought damaged the crop. In other regions, on the other hand, crop has good development, but some farms in the Mato Grosso state were facing problems with pests and rains.

Data from Secex (Foreign Trade Secretariat) indicate that Brazil shipped 39.6 thousand tons of cotton in March 2013, 16.4% lower than in February and 38.1% above than in March 2013. The average price of exports was 0.8912 dollar per pound last month.

Center for Advanced Studies on Applied Economics (CEPEA)

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