Cotton prices rise to record BRL 6 per pound in Brazilian market

20 Oct '21

3 min read

Pic: Shutterstock

Cotton prices hit BRL 6.00/pound in the Brazilian market in the first fortnight of October, a nominal record in the series of Center for Advanced Studies on Applied Economics (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 fibres, competitors in the textile industry, and high demand, majorly from Asia. In the Brazilian spot market, prices also got boost due to 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,” CEPEA said in its latest fortnightly report on the Brazilian cotton market.

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

In the Brazilian market, the CEPEA/ESALQ Index for cotton closed at 6.0113 BRL/pound on October 11, dropping to 5.9587 BRL/pound on October 15, i.e. 5.15 per cent up from that on September 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 per cent higher than that in October 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 fertilisers, may constrain area increases.

According to Conab (Brazil’s National Company for Food Supply), the Brazilian cotton area may grow by 10.2 per cent in the 2021-22 season, to 1.51 million hectares. Productivity may increase by 3.1 per cent, to 1,772 kg/hectare, boosting production by 13.7 per cent, to 2.68 million tons. Domestic consumption is expected to grow by 2.5 per cent between the 2020-21 and the 2021-22 seasons, to 765,000 tons. Exports may be around two million tons, contributing to reduced ending stocks.

Meanwhile, data from Secex (the secretariat of foreign trade) shows that in September Brazil exported 140,210 tons of cotton, much higher than the 50,780 tons shipped in August 2021 (+176.1 per cent), but 11.72 per cent down from the volume exported in September 2020 (158,830 tons).

Fibre2Fashion News Desk (RKS)

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