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Liquidity hike strengthens Brazilian cotton prices
Aug '14
Since the last few days, due to a rise in liquidity, cotton trade in the Brazilian market has started moving at a slightly faster pace, although only small lots are being traded.

This scenario is strengthening cotton prices in the Brazilian market. Most cotton growers are holding on to their stocks, due to which buyers are offering higher quotes for high-quality cotton, but supply of high-quality cotton is low.

In general, the price gap between asking and bidding prices continues to limit new trades.

Due to sharp price drops in previous months, cotton producers continue to focus on fulfilling contracts and harvesting cotton.

The textile industry, on the other hand, is not willing to pay higher prices for cotton and if they do pay, they are demanding longer credit periods.

Cotton trading companies are keeping a keen eye on fluctuations in the international market and as a result, are more careful regarding quotes offered in Brazil.

The CEPEA/ESALQ Index for cotton type 41-4 closed at 1.6891 real (0.7480 dollar) per pound on August 18, up 1.76% from August 11.

Cotton traders surveyed by CEPEA say that the cotton quality, in some cases, does not meet the required standards.

Despite slight cotton price increase in mid-August, regional quotes are below the government’s floor price. So, cotton producers continue to expect a possible intervention from the government, through auctions, in an attempt to stabilise prices.

Between August 11 and 15, Cotlook A Index rose 0.65% compared to its previous week ending August 8. In the same period, the dollar dropped 0.25%. The export parity calculated by Cepea FAS (Free Alongside Ship) Paranaguá port averaged 1.4222 real per pound.

The import parity released by Conab (National Company for Food Supply), based on the index for Cotlook A, CIF São Paulo averaged 1.9804 real per pound in the same period, moving up 0.49%.

Fibre2fashion News Desk - India

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