Good demand boosts Brazilian cotton prices

05 Dec '13

2 min read

Cotton quotes have been moving up in the Brazilian market, affected by the higher demand. Many companies are operating more at this end-of-the-year period, aiming to guarantee the raw material that is necessary to the consumption for the end of 2013 and early 2014.

Purchasers accept to pay higher prices, mainly when trades involve good-quality batches. However, when the product does not reach the desirable quality, agents pay relatively stable quotes.

In regard of sellers, only trading companies are operating more in the market – which favors cotton dealers. Therefore, in general terms, refrained sellers prevail. Cotton growers, who expect the upward trend to continue, are refrained in the spot market.

These players indicate uncertainties in regard of cotton areas, for both first and second crops. Prices are higher compared to one year ago; however, production costs and the slow pace of anticipated trades are aspects that will be taken into account in the decision making.

The CEPEA/ESALQ Index for cotton type 41-4 moved up 1.1% in November, closing at 2.1129 reais (0.9044 dollar) per pound on Nov. 29.

As for the Brazilian crop development, the government announced phitosanitary emergency in Bahia, Mato Grosso, Goiás and some areas in Minas Gerais. Therefore, players are free to use insecticides against Helicoverpa armigera caterpillar.

The USDA indicates that the planted area and the cotton production in the 2013/14 crop might increase. The area may total between 1 and 1.2 million hectares, which indicates uncertainties regarding the possible volume of supply.

As for the demand, the USDA anticipates that new data for Brazil will be lower compared to what was released in November. Exports may keep up a low volume.

CEPEA

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