Lower economy presses down cotton market in Brazil

07 Jun '12

2 min read

Center for Advanced Studies on Applied Economics (CEPEA) reported that in May, the world cotton market was again influenced by unfavorable macroeconomic conditions. Players expected economies to recover, which would relieve pressure on high ending stocks forecast for both the current and next seasons. In the Brazilian market, liquidity has not increased, and purchasers postponed trades, expecting more significant price drops.

In May, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) dropped 3.43% and closed at 1.5420 real or 0.7645 dollar per pound on May 31. Trades in Brazil were limited in late May because of the low quality of the cotton available in the market.

Only some purchasers who have immediate needs to trade have operated in the market. Most agents expected more price decreases in the short-run; therefore, they continued refrained from trading.

Producers, in turn, have offered some batches at lower prices. In general terms, sellers were focused on the harvesting activities and traded other products, such as grains.

Mato Grosso and Mato Grosso do Sul states registered a large amount of rains in May, compared to the same period of previous years. Consequently, harvesting activities were delayed and cotton growers in those regions were concerned with the quality and the yield.

Center for Advanced Studies on Applied Economics (CEPEA)

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