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Brazilian cotton trade turns cautious
18
Sep '14
The Brazilian cotton trade has turned cautious in the just concluded fortnight, mainly from price volatility in Brazil, rise in global prices in early September and the dollar valuation against Brazilian currency real, which has also led to low liquidity in the spot market.

The CEPEA/ESALQ Index for cotton type 41-4 closed at 1.6892 BRL (0.7212 dollar) per pound on September 15, rising only by 0.11% compared to September 8, while it actually decreased 1.5% in the fortnight ending September 15.

Additionally and besides the already announced possible government intervention, lead sellers to refrain from striking new deals, because of the fear of PEPRO (Equalization Premium Paid to the Producer and/or Cooperative) auction occurring anytime soon.

As a result, only cotton growers who are in need of cash have been seen operating, but they too have been offering only low-quality cotton varieties.

As for purchasers, only industries with immediate needs are trading. Companies from Northeast Brazil are showing more interest to trade compared to those from South and Southeast for fear that quotes might drop even more, due to anticipated higher production of new crop.

Trading companies with an eye on increases of dollar quotes and global price rise have been trading cotton in both domestic and international markets, offering batches at higher quotes compared to early September.

Conab data released on September 9 indicates that cotton supply in Brazil in the 2013/14 crop might total 1.7 million tons, 32.3% higher than the previous and the yield is expected to reach 1.520 kilos per hectare on a total acreage of 1.12 million hectares.

In the week ending September 212, the Cotlook A Index fell 0.52% compared to closing of its previous week. In the same period, the dollar average picked up 2.37%. The export parity calculated by Cepea FAS (Free Alongside Ship) Paranaguá port averaged 1.4503 real per pound, up 1.94% from previous fortnight. (AR)

Fibre2fashion News Desk - India

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