Low supply pushes cotton prices up in Brazil this month

During the fortnight, Brazilian cotton farmers became focused on the harvesting and processing of cotton and on the accomplishment of contracts. Many sellers took advantage of the price levels in that period to close new deals for further delivery – to both the domestic and the international markets – for the cotton from the 2021-22 and the 2022-23 seasons, Sao Paulo-based Center for Advanced Studies on Applied Economics (CEPEA) said in its latest fortnightly report on the Brazilian cotton market.

Besides, aware of the higher prices at ICE Futures, agents fixed prices for the contracts that had not been closed yet, the CEPEA report said.

Meanwhile, cotton harvesting was complete in near 50 per cent of the total cotton area in Brazil, by August 13, according to data from Abrapa (Brazilian Cotton Producers Association). Cotton processing was at 10 per cent of the expected for the season. "Supply was still low, and Brazilian purchasers were buying low volumes, only when they needed to replenish inventories."

In July, Brazil exported 61,400 tons of cotton, about 39 per cent less than the volume shipped in June and 20.6 per cent below that from July 2020, according to data from Secex, the secretariat of foreign trade.

A report released by Conab (Brazil’s National Company for Food Supply) on August 10 showed a decrease of 0.11 per cent in the estimates for the Brazilian cotton area in the 2020-21 season compared to that reported in July, now forecast at 1.36 million hectares, 18 per cent smaller than that in the previous season. Productivity estimates were revised up by a slight 0.04 per cent compared to that reported in July, to 1,714 kilograms/hectare, but 4.9 per cent down from that in the 2019-20 crop. The Brazilian output is currently estimated at 2.341 million tons, stable compared to that previously reported, but 22 per cent lower than that in the previous season.

Domestic consumption is estimated at 715,000 tons, and the exports in 2021 are now forecast at 2.1 million tons, 1.2 per cent down from that estimated for the 2019-20 season. Thus, ending stocks in the current season are estimated at 1.29 million tons, 6.9 per cent lower than that reported in July and 26.8 per cent below that last season. If this is confirmed, the inventory/consumption ratio will be the lowest in the last three seasons, Conab said.

Fibre2Fashion News Desk (RKS)