Cotton prices dropped sharply in the Brazilian market during the first fortnight of July 2017 as sales offers were higher than demand. Between June 30 and July 14, the CEPEA/ESALQ Index, 8-day payment terms, for cotton type 41-4, delivered in São Paulo, dropped 4.24 per cent, closing at 2.5479 BRL per pound on July 14, the lowest since November 11, 2016.
Many cotton batches from the new 2016-17 season were traded in the first fortnight of July for prompt delivery, but with small volumes. “Active sellers were flexible regarding prices, making available products from several regions. Purchasers, however, were cautious and processors were only interested in replenishing their inventories,” Center for Advanced Studies on Applied Economics (CEPEA) said in its fortnightly report on the Brazilian cotton market.
The first batches from the 2016-17 crop were of low quality, according to Cepea collaborators. So, purchasers were not very active in the spot market, waiting for the harvesting to advance in the next days and bidding lower prices than asking prices. Traders, in turn, were trying to purchase cotton to accomplish contracts previously closed.
Regarding exports, from August onwards, the pace of trade is forecast to increase. Although most agents were focused on future trades in the domestic market, the gap between asking and bidding prices limited trades in the first fortnight of July.
On July 11, Conab (government agency) announced that the 2016-17 Brazilian crop should total 1.484 million tons, 15.2 per cent more than the quantity harvested in the previous crop, but slightly down compared to the report released in June 2017. Despite the 1.7 per cent reduction in the area sown this season, productivity is expected to be 17.1 per cent higher than that in the 2015-16 season, at 1,580 kilos per hectare.
In Mato Grosso, the largest cotton producing state in Brazil, the harvesting of the 2016-17 season has reached 5 per cent of the sown area, according to Conab. With production favoured by the weather, estimates are for 993 thousand tons, 12.8 per cent up compared to the previous crop. Productivity may be 7.9 per cent higher, at 1,466 kilos per hectare.
Meanwhile, according to data from the Brazilian commodity exchange BBM, tabulated by Cepea, 85.7 per cent of the 2015-16 Brazilian crop, estimated at 1.289 million tons, had been traded until June 30. Of that total, 56.3 per cent was for consumption by the domestic market, and 43.7 per cent, was meant for exports.
Regarding the 2016-17 crop, estimated at 1.48 million tons, 44.7 per cent has been traded. Of that volume, 48.3 per cent were allocated to the domestic market, and 51.7 per cent, to the international market. (RKS)
Source: www.fiber2fashion.com