Brazilian cotton prices rise in first fortnight of April

Cotton prices continued to rise in Brazil in the first fortnight of April. The boost came from both higher demand and sellers’ retraction. Between March 29 and April 13, the Center for Advanced Studies on Applied Economics/Department of Economy, Administration and Sociology, Luiz de Queiroz College of Agriculture (CEPEA/ESALQ) cotton Index rose 4.9 per cent.“Brazilian processors were active in the spot market during the fortnight, mainly searching for high-quality batches (41-4 and above). In order to close trades, these purchasers needed to increase bidding prices, even for lower-quality batches. Some processors, however, were unwilling to pay more for the product, claiming quality is mixed, as well as difficulty to pass on cotton price rises to by-products, mainly thread. In these cases, they worked with the cotton previously purchased,” CEPEA said in its latest fortnightly report on Brazilian cotton market.

As for sellers, some cotton farmers were away from the market, waiting for prices to increase, while others claimed not to have batches from this season (2016-17) to offer. Trading companies and merchants, in turn, were not very active in the spot market.

Meanwhile data released by Conab (National Company for Food Supply) on April 10 estimated 2017-18 Brazilian cotton output at 1.862 million tons, almost 22 per cent up compared to that in the previous season. Area was estimated at 1.144 million hectares (+21.9 per cent), while productivity is expected to remain stable at 1,627 kilos per hectare (-0.1 per cent).

In Mato Grosso, the main cotton producing province in Brazil, crop conditions are good, with productivity forecasts within the historical average for cotton. Thus, even if productivity increases by 1.8 per cent, larger area (18.9 per cent) may lead to an output at 1.224 million tons in the 2017-18 season, which would be 21.1 per cent higher than the 1.011 million tons in the previous season.

In Bahia, another cotton growing region in Brazil, Conab forecasts productivity at 1,600 kilos per hectare, down 6.8 per cent. Thus, the output from Bahia is estimated to total 424,200 tons in the 2017-18 season (+22.5 per cent), with area forecast at 265,100 hectares.