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Low supply pushes up price in Brazilian cotton market
Jun '18
Low supply pushes up price in Brazilian cotton market
Owing to lower 2016-17 supply and the slow pace of the 2017-18 harvesting, cotton prices increased in the Brazilian market in May. Between April 30 and May 30, the Center for Advanced Studies on Applied Economics/Luiz de Queiroz College of Agriculture (CEPEA/ESALQ) cotton Index rose 12.3 per cent, closing at 3.7491 BRL ($1.0024) on May 30.

During the month, growers, trading companies and/or traders only had a few batches to offer. Some of them seemed to be accomplishing contracts involving the 2016-17 crop, CEPEA said in its latest fortnightly report on the Brazilian cotton market.

On the other hand, buyers showed interest in new acquisitions in the spot market, even for mixed quality batches. However, only some agents agreed to pay the prices asked by sellers.

In general, processors were finding it difficult to pass on the price rises of raw material to by-products. So, some of them reduced the production pace and worked only with stocked cotton. Others opted for purchasing 100 per cent thread and/or mixed, lowering the needs for cotton.

The May 21 truckers strike, due to rise in fuel prices, hindered transportation, resulting in reduced trade in the spot market.

Meanwhile, data from the BBM (Brazilian Commodity Exchange) tabulated by CEPEA indicates that 75.1 per cent of the 2016-17 Brazilian crop (estimated at 1.529 million tons) had been traded until May 29. Of this total, 61.9 per cent was allocated to the Brazilian market, 27.5 per cent, to the international market, and 10.6 per cent to flex contracts (for exports, but with an option to sell in the domestic market).

For the 2018-19 season, data shows that at least 46.9 per cent of the 2017-18 output (forecast at 1.942 million tons) has been traded. While 46.8 per cent of the sales were meant for the domestic market, 37.5 per cent were for exports, and the remaining 15.7 per cent to flex contracts. (RKS)

Fibre2Fashion News Desk – India

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