Brazil's cotton index drops 5.5% in July 2022

In July (June 30 – July 29), Brazil’s CEPEA/ESALQ Index for cotton dropped by 5.55 per cent. Domestic prices were 2.2 per cent lower than the export parity last month. The monthly average in July, of BRL 6.0465/pound, is 18.32 per cent lower than that in June, but still 10.75 per cent higher than the average a year ago (values were deflated by the IGP-DI inflation rates from June 2022).

“With the progress of the harvesting, processing and classification of cotton batches, farmers continued to prioritise the accomplishment of contracts, not closing many deals in the spot market, influenced by uncertainties about productivity in the 2021/22 season in some regions. These agents were not closing deals because most of these contracts were closed at higher prices than that observed in the national spot market,” Center for Advanced Studies on Applied Economics (CEPEA) said in its latest fortnightly report on the Brazilian cotton market. 

“Considering purchasers, agents from some processors were away from the market, working with the cotton stocked and/or being delivered (previously purchased), since some of them have been working with reduced capacity and/or facing difficulties to sell some finished products,” the report added.

In US dollar terms, the cotton Index (cash price) averaged $1.1236/pound in July, 14.5 per cent lower than the Cotlook A Index ($1.3140/pound), but 13.2 per cent higher than the first contract traded at ICE Futures ($0.9927/pound), which is the lowest since September 2021, when it averaged $0.9575/pound.

By July 28, around 48.54 per cent of the 2021-22 Brazilian cotton crop had been harvested, according to ABRAPA, the Brazilian cotton growers’ association. Around 15 per cent of the cotton harvested has been processed.

Fibre2Fashion News Desk (RKS)