Brazil's cotton index rises 7.9% in August 2021 – ChinaTexnet.com
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Brazil's cotton index rises 7.9% in August 2021

2021-09-07 08:32:40 Fibre2Fashion

Between July 30 and August 31, Brazil's CEPEA/ESALQ Index for cotton increased by 7.9 per cent, closing at 5.3540 BRL/pound on August 31. A day earlier on August 30, the Index closed at 5.4748 BRL/pound, a new nominal record since CEPEA Index began in 1996. The monthly average in August closed at 5.2579 BRL/pound, 5.74 per cent higher than that in July 2021.

The rise in Index during the month was due to slightly higher demand, low cotton supply in the national spot market and international valuations for the product, the Sao Paulo-based Center for Advanced Studies on Applied Economics (CEPEA) said in its latest fortnightly report on the Brazilian cotton market.

In general, during the month, "Brazilian cotton farmers were focused on the harvesting, cotton processing and the accomplishment of contracts. The sellers interested in closing deals continued to increase asking prices along the month, based on the lower output in the 2020-21 season, the high volume already traded and lower inventories. In the last week of the month, however, agents from trading companies were more interested in closing deals in the domestic market, where prices have been more attractive than export values," the CEPEA report said.

"As regards purchasers, some of them needed cotton for prompt delivery, while others were not interested in buying the product late in the month, expecting values to decrease as cotton processing advances and contracts are closed. Some processing plants reported higher sales in August, but these agents were still cautious about purchasing high volumes, fearing difficulties to pass on production costs," the report added.

For the 2020-21 season, the Brazilian Cotton Producers Association (Abrapa) estimates that, until August 26, cotton harvesting had reached 78 per cent of the area in Brazil, and cotton processing, 26 per cent. In Mato Grosso and in Bahia, the two largest cotton producing provinces in the country, processing has reached 18 per cent and 40 per cent of the output, respectively.

Meanwhile, the first crop estimates from Conab, the National Supply Company, for the 2021-22 season, points to an area of 1.548 million hectares in Brazil, 13.4 per cent larger than that in 2020-21, influenced by the current high prices in the international market, the strong dollar compared to the Real, high profitability of cotton farming in Brazil and the volume sold earlier. According to Conab, "the high profitability of corn crops may constrain increases in the cotton area in Brazil."

Productivity is forecast at 1,750 kilograms per hectare, 2.1 per cent up from that in the 2020-21 season. Thus, the Brazilian output is expected to grow by 15.8 per cent compared to that in the previous season, to 2.71 million tons in 2021-22.

Domestic consumption is likely to increase from 715,000 tons to 760,000 tons in the 2021-22 season (+6.3 per cent). On the other hand, Brazilian cotton exports are forecast at 2.03 million tons, 3.3 per cent down from that estimated for 2020-21. Thus, ending stocks are estimated at 1.045 million tons, 19.1 per cent lower than that in the previous season. Thus, the inventory/consumption ratio in 2021 is forecast at 181 per cent, possibly falling to 137 per cent in 2022, the lowest in four years.

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