Cotton trading pace in Brazilian market slows down in May

03 Jun '21
3 min read
Pic: Shutterstock
Pic: Shutterstock

The trading pace for cotton slowed down in the Brazilian spot market in May, as purchasers put pressure and bid for lower prices. While some sellers agreed to lower asking prices, many farmers did not and stayed away from the market. As a result, traders purchased cotton to accomplish contracts, Center for Advanced Studies on Applied Economics (CEPEA) said.

Between April 30 and May 31, the CEPEA/ESALQ Index for cotton dropped by 2.5 per cent, to 5.0412 BRL/pound on May 31.

As regards term contracts for the 2020-21 season, "sales were high in May, since Brazilian processors aim to have raw material in the coming months – as exports have been fast, supply from the 2020-21 crop is low, and high amounts have already been sold. Agents from some trading companies were interested in closing deals, majorly for sale," CEPEA said in its latest fortnightly report on Brazilian cotton market.

Until April 25, 2021, at least 45 per cent of the 2019-20 Brazilian cotton crop and 29 per cent of the 2020-21 crop may have been traded, according to data from the BBM (Brazilian Commodity Exchange) tabulated by CEPEA. Considering that in the last five seasons 74 per cent of the Brazilian cotton output was registered, 61% of the current production and 39 per cent of the next may have been sold.

On the export front, 81,600 tons of cotton was shipped in the first 15 working days of May, according to data from Secex (the foreign trade secretariat), 17.3 per cent more than the amount exported in May 2020. In that period, the daily average of shipments was at 5,400 tons, much higher than the 3,480 tons/day in May 2020. From August 2020 to May 2021, Brazil exported 2.2 million tons of cotton, a record. In 12 months, shipments totalled 2.34 million tons, also a record.

Meanwhile, in a report released on May 12, Conab (Brazil’s National Company for Food Supply) estimated the Brazilian cotton area to total 1.38 million hectares in the 2020-21 season, 17.2 per cent down from that in 2019-20. Productivity is forecast at 1,771 kilos per hectare, 1.7 per cent lower than that in the previous season. As a result, production should total 2.442 million tons, 18.6 per cent down from that in the 2019-20 season.

Since the first report released by Conab in October 2020, the estimates for the 2020-21 production have decreased by 13.3 per cent, pressed down by the 14.6 per cent decrease in area. Conab estimates the domestic availability (initial inventories + production estimates) to total 4.208 million tons.

Fibre2Fashion News Desk (RKS)

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