Cotton Prices In Brazil Drop As Harvesting Begins

MUMBAI (Commoditiescontrol) - Brazilian cotton prices decreased in the last days after four weeks of highs due to the industries retraction. Purchasers should receive cotton from previous contracts in early July. Besides, they expect supply to increase with the harvesting beginning in many Brazilian regions. However, traders in need to accomplish contracts are buying, bidding lower prices.

Some sellers, in turn, are flexible regarding asking prices, especially for batches with some characteristic. Others, with no need to make cash, are firm. Trades should be warmed in the second half of July, as harvesting advances. In general, producers are worried about the profitability because of the cold weather and rains that occurred last week.

With this scenario, liquidity is low. Between 22-29 June, 2015, the CEPEA/ESALQ Index, with payment in 8 days, for cotton type 41-4 (including freight to Sao Paulo city) dropped 0.73 percent, closing at 2.1028 BRL per pound (0.675 dollar/pound) on 29th June. In the accumulated of the month (until 29th June), the Index increased 3.6 percent. The average of June, at 2.0886 BRL (0.671 dollar) per pound, is 0.3 percent lower than in May/15 but is 3.33 percent higher than in June/14 - values deflated by IGP-DI (Brazil’s general price index) from May/15.

Export trades, in turn, have been favored by the dollar valued against Real, increase in export parity and in future contracts on ICE Futures. New export trades have been confirmed to be delivered in the second semester of 2015 and in 2016. In the partial of the month (until 29th June), export price to shipment in the second semester of 2016 averaged 0.7008 dollar per pound, almost 3 percent lower than the average of trades done in May/15. From July to December/15 - which refers to the 2014/15 crop - the average is 0.6865 dollar per pound, 1.23 percent lower than last month.

Between 22-26 June, 2015, the export parity calculated by Cepea, FAS (Free Alongside Ship) at Paranagua port, at 1.9066 BRL (0.614 dollar) per pound, increased 0.2 percent compared to last week (from 15-19 June). In the same period, Cotlook A Index decreased 0.25 percent and dollar, 0.45 percent regarding Real.

(By Commoditiescontrol Bureau; +91-22-40015534)