Brazilian Cotton Prices Drop in First Fortnight of August

Cotton prices dropped in the Brazilian market in the first fortnight of August. The average price during the first 15 days was 2.4379 BRL per pound, which was the lowest since January 2016 when price touched 2.5096 BRL per pound, Center for Advanced Studies on Applied Economics (Cepea) said in its fortnightly report for August 1-15, 2017.

In view of sharp price drops in international markets (ICE Futures and CotLookA) in the first fifteen days of the month, some sellers focused on the domestic market, increasing supply and speeding up the pace of trades in the Brazilian market on some days.

Most processors, on the other hand, preferred to work with the cotton previously purchased, searching only for small batches in the spot market and, thus, pressing down quotes, the report said.

The CEPEA/ESALQ Index, 8-day payment terms, for cotton type 41-4, delivered in São Paulo, dropped 1.01 per cent between July 31 and August 15, closing at 2.4416 BRL ($0.7687) per pound on August 15.

Meanwhile cotton exports from Brazil totaled 19.3 thousand tons in July, registering an increase of 37.9 per cent over the previous month, according to Secex. During the same month, Brazil imported only 920.5 tons of cotton, showing a drop of 67.1 per cent compared to previous month’s imports of 2.8 thousand tons.

The National Company for Food Supply (Conab) has upwardly revised the 2016-17 Brazilian crop estimate to 1.523 million tons, up 18.2 per cent compared to previous season’s production. The volume of cotton is expected to be higher despite the 1.7 per cent decrease in the area sown. This is due to increase in productivity, which may be 1,622 kilos per hectare, up 20.1 per cent compared to the 2015-16 crop.

According to Conab, Mato Grosso, the main cotton producing state in Brazil, is expected to increase its cotton output by 15 per cent in 2016-17, totaling 1.013 million tons. Productivity may also increase by 10.1 per cent compared to the previous season, at 1,614 kilos per hectare. According to Conab, drier weather has favoured harvesting and, until late July, 20 per cent of the area is supposed to have been harvested. Around 60 per cent of the volume produced in the state has already been traded.