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Cotton Index hits BRL 6.00/pound in the Brazilian market

 

Cepea, October 18, 2021 – Cotton prices hit BRL 6.00/pound in the Brazilian market in the first fortnight of October, a nominal record in the series of Cepea (which began in 1996), and the export parity in dollar, the Cotlook A Index and the Futures at ICE Futures have been at the highest levels in the last 10 years.

 

The boost came from both the valuation of synthetic fibers, competitors in the textile industry, and high demand, majorly from Asia. In the Brazilian spot market, prices were also boosted by sellers’ firm stance – these agents were unwilling to lower asking prices, forcing some processors to pay more for cotton, majorly those that work with low inventories. However, logistic issues and concerns about China constrained valuations.

 

Between September 30 and October 15, the Cotlook A Index rose by 2.6%, to 1.1305 USD/pound on Oct. 15. The US dollar increased by 0.4% compared to the Real, to 5.46 BRL on Oct. 15. Thus, the export parity FAS (Free Alongside Ship) closed at 5.3949 BRL/pound (0.9881 USD/pound) at the port of Santos (SP) and at 5.4054 BRL/pound (0.9900 USD/pound) at the port of Paranaguá (PR) on Oct. 15, 3.1% up from that on Sept.30.

 

In the Brazilian market, the CEPEA/ESALQ Index for cotton closed at 6.0113 BRL/pound on Oct. 11, dropping to 5.9587 BRL/pound on Oct. 15, 5.15% up from that on Sept. 30. On the other hand, liquidity was low in the national spot market, due to the gap between asking and bidding prices.

 

The monthly average in October (considering the first half of the month) is 61.6% higher than that in Oct/2020, in nominal terms. Thus, the area allocated to cotton in Brazil is expected to be larger next season, however, high production costs and difficulties to buy inputs, majorly fertilizers, may constrain area increases.

 

According to Conab (Brazil’s National Company for Food Supply), the Brazilian cotton area may grow by 10.2% in the 2021/22 season, to 1.51 million hectares. Productivity may increase by 3.1%, to 1,772 kg/hectare, boosting production by 13.7%, to 2.68 million tons. Domestic consumption is expected to grow by 2.5% between the 2020/21 and the 2021/22 seasons, to 765 thousand tons. Exports may be around two million tons, contributing to reduce ending stocks.

 

EXPORTS – Data from Secex show that, in September, Brazil exported 140.21 thousand tons of cotton, much higher than the 50.78 thousand tons shipped in Aug/21 (+176.1%), but 11.72% down from the volume exported in Sept/20 (158.83 thousand tons).

 

(Cepea-Brazil)

 

 

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