Industry need push up cotton prices in Brazil

05 Sep '12

2 min read

Center for Advanced Studies on Applied Economics (CEPEA) reports that in Brazil, cotton quotes continued to move up in late August due to the low supply and the need of the industry to purchase. Trades continued at a slow pace in the Brazilian market.

In August, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) upped 6.05% and closed at 1.6787 real or 0.8269 dollar per pound on Aug. 31.

Cotton growers were refrained from trading and were focused on the accomplishment of contracts, mostly to export, which limited the supply in the spot market at the end of August. Cotton ginning was delayed and sellers were trading below-desirable quality cotton.

The industry still needed to purchase most of the cotton necessary to keep the processing activities at the end of the month. In case estimates that Brazil exports more than 1 million cotton tons, the domestic demand reaches more than 900 thousand tons and that production amounts 1.9 million tons are confirmed, the supply and the demand might be counterbalanced, which may limit sharp price fluctuations.

In the international scenario, in late August, the market started to be influenced by the smaller planted area with cotton in South America and possibly, in the world, in the next season. The higher profitability of grains (soybean/corn) may lead producers to change activities. China’s demand for cotton continued firm, though.

Center for Advanced Studies on Applied Economics (CEPEA)

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