In a strategic move, farmers chose to focus on exports while waiting for more favourable conditions in the domestic market. Many of these agents have kept their distance from the spot market, keeping a keen eye on the progress of the 2022-23 crop season.
On the demand side, recent cotton valuations have led many buyers to raise their bids. This is particularly true for those in urgent need of restocking inventories. Other buyers have closed occasional deals in late May, either for immediate delivery or to replenish stocks, given the weak demand across the textile industry, CEPEA said in its latest fortnightly report on the Brazilian cotton market.
The CEPEA/ESALQ Index for cotton, which had fallen by 6.73 per cent by May 10, bounced back by 3.4 per cent between April 28 and May 31, standing at BRL 4.1127/pound as of May 31.
Despite this recent rise, the average price in May, which ended at BRL 3.9288/pound, is still 3.7 per cent below the export parity value, 8.9 per cent lower than in April 2023, and a staggering 49.02 per cent decrease from May 2022. This average price is also the lowest monthly average since October 2019, when it ended at BRL 3.8465/pound, after adjusting for inflation.
In nominal terms, the monthly average of the Cotlook A Index ended at $0.9406/pound (as of May 29), the lowest since May 2021 ($0.9094/pound). The average of the cotton Index (cash), which finished at $0.7743/pound, was 17.7 per cent lower than the Cotlook A Index. Compared to the average of the first contract at ICE Futures (NY), which was $0.82 by May 2023, domestic prices were 5.6 per cent lower, the report added.
Fibre2Fashion News Desk (KD)