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Brazilian cotton prices dip on low buying interest

Jun '19
Pic: Shutterstock
Pic: Shutterstock
Expectation of a large 2018-19 cotton crop kept purchasers retracted from the spot market leading to a dip in prices during the first fortnight of June 2019. After dropping 2.58 per cent in May, between May 31 and June 14, the CEPEA/ESALQ cotton Index, with payment in 8 days, decreased 2.1 per cent, closing at 2.8124 BRL per pound on June 14.

During the fortnight, trading companies were more flexible regarding prices due to the decreases for both future contracts at the New York Stock Exchange (ICE Futures) and the US dollar. In the first week of June, the average cotton price in the Brazilian market was only 6.3 per cent higher than the exports parity price, the Center for Advanced Studies on Applied Economics (CEPEA) said in its latest fortnightly report.

Meanwhile, lower temperatures are likely to delay maturation of cotton crop, and consequently, the harvesting of the 2018-19 crop in some areas of Mato Grosso and Bahia. Rains in some areas in previous months may also hamper fieldwork, according to CEPEA.

Conab’s (National Company for Food Supply) ninth crop survey released on June 11 revised up the 2018-19 expected output to 2.67 million tons, up 33.4 per cent compared to the previous season. Higher production estimates are linked to the increase in the area to be sown by 36.2 per cent. However, the average productivity is likely to dip by 2 per cent to 1,673 kilos per hectare.

The output from Mato Grosso is estimated at 1.76 million tons, 36.8 per cent up compared to the 2017-18 crop, despite the slight 1.1 per cent decrease in the average productivity to 1,641 kilos per hectare. In Bahia, the output is predicted at 587,600 tons, up 17.9 per cent due to 35.9 per cent larger area under cotton. However, the average productivity may decline 6.3 per cent to 1,770 kilos per hectare.

During the current cotton season from August 2018 to May 2019, Brazil exported the record volume of 1.2 million tons of cotton. (RKS)

Fibre2Fashion News Desk – India

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