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Cotton prices drop in Brazilian market as buyers retract

May '19
Cotton prices drop in Brazilian market as buyers retract
Cotton trades were at a slow pace and prices dropped in the Brazilian market in the first fortnight of May. Between April 30 and May 15, the CEPEA/ESALQ cotton Index, with payment in 8 days, dropped 2.7 per cent, closing at 2.8679 BRL per pound on May 15. The price average this month, at 2.9044 BRL per pound, was 0.9 per cent lower than that in April 2019.
“Purchasers, mainly processing plants, showed low interest in new acquisitions in the spot market, and made bids only for small batches to replenish inventories. Besides the low liquidity in the cotton by-products market, some buyers were working with the product purchased throughout contracts. International devaluations (Cotlook A and Futures at ICE Futures) also drove agents away from the Brazilian market,” Center for Advanced Studies on Applied Economics (CEPEA) said in its latest fortnightly report on the Brazilian cotton market.
“In general, purchasers were waiting for the harvesting to start in Mato Grosso and Bahia, since they have closed deals with delivery scheduled from July. Sellers, in turn, were willing to lower asking prices, since most of the batches supplied had lower quality. Growers were ending the deliveries previously scheduled or making available in the spot market the cotton remaining from the 2017-18 crop,” the report added.
Meanwhile, data from the BBM (Brazilian Commodity Exchange) tabulated by CEPEA shows that 836,000 tons of cotton from the 2017-18 crop had been traded in the Brazilian market until May 14, out of a 2 million tons output, according to Conab (National Company for Food Supply). For the 2018-19 season, trades have reached 329,000 tons and the total harvest is expected to reach 2.66 million tons.
Conab estimates Brazil’s 2018-19 cotton output to reach 2.66 million tons, 32.8 per cent larger than the previous season. It is mainly due to the increase of 35.4 per cent in the area sown. However, productivity is likely to dip 1.9 per cent to 1,676 kilos per hectare. In Mato Grosso, the harvest may total 1.76 million tons, up 36.8 per cent over the previous season, while in Bahia, estimates were revised up by 17.9 per cent compared to that from April, to 587,000 tons.
In April 2019, Brazil exported 71,800 tons of cotton, 26.7 per cent less than in March 2019 (97,900 tons), but a staggering 150.7 per cent up compared to the volume exported in April 2018 (28,600 tons), according to data from Secex, the secretariat of foreign trade. (RKS)

Fibre2Fashion News Desk – India

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