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Cotton prices move down in Brazil

19
Jun '12
Center for Advanced Studies on Applied Economics (CEPEA) reported that due to the holiday of Corpus Christi in Brazil, June 7, and the downward trend in the Brazilian market, most sellers and purchasers only observed the market in early June. Some sellers, in general terms, were more flexible regarding prices. The sharp drop in the export parity has also pressed quotes down in Brazil.

The CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) dropped 3.04% in the partial of June (May 31 – June 15) and closed at 1.4951 real or 0.7325 dollar per pound on June 15.

Some cotton growers were more inclined to sell off the product from the 2010/11 season due to advances of the harvesting. Therefore, they were asking for lower prices. Other producers remained focused on fieldwork, mainly in Mato Grosso state.

Some processing companies, with immediate needs, have closed some trades, but only small amounts. These agents, who expect price drops to continue, opt to postpone trades.

In May, Brazilian shipments hit a monthly record for the month. Data from Secex (Foreign Trade Secretariat) indicate that Brazil exported 59 thousand tons of cotton in May, 13.9% more than in April. In the accumulated of the year, shipments totaled 285.4 thousand tons, against 47.6 thousand in the same period of 2011.

Conab data from June 5 indicated that the cropped area in the 2011/12 season was defined at 1.398 million hectares, 0.2% less in relation to that in 2010/11 (1.4 millions). The yield may be 1,410 kilos per hectare, 0.7% more than in the crop before. The production, in turn, might amount 1.97 million tons, 0.5% higher.

In world terms, Icac (International Cotton Advisory Committee) forecasts a production of 27.1 million tons, against a demand of 23.1 million tons. Consequently, ending stocks may increase to 13.3 million tons.

In 2012/13, the production might shrink to 25.1 million tons, amounting a similar volume to the 2010/11 crop, while the demand may move up to only 23.9 million tons. China is expected to reduce imports because the country has good inventories.

Center for Advanced Studies on Applied Economics (CEPEA)


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