Fluctuating Cotton Prices in Brazil Reflect Global Market Dynamics
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- Published: Friday, 17 May 2024 17:18
During the first half of May, cotton prices in Brazil underwent fluctuations, ultimately showing a downward trend by mid-month. Sellers, particularly those looking to clear stocks from the 2022-23 season, displayed flexibility in pricing early in the month. However, prices declined as certain industry players offered lower rates to secure new deals, according to the Centre for Advanced Studies on Applied Economics (CEPEA).
As the month progressed, domestic cotton prices experienced a brief uptick, driven by increases in international prices. Strong short-term demand and positive mid-term outlooks, especially fueled by rising incomes in emerging Asian markets, contributed to slight price hikes for cotton deliveries to the Far East. This upward movement influenced both the futures market and export parity. However, these factors failed to sustain the upward trajectory, resulting in a subsequent price drop.
Between April 30 and May 15, the CEPEA/ESALQ Cotton Index decreased by 2.99 percent, closing at BRL 3.8063 (~$0.74) per pound on May 15.
A report released by the National Supply Company (CONAB) on May 14 projected the cotton cultivation area in Brazil for the 2023-24 season to reach 1.942 million hectares, marking a 16.7 percent increase compared to the previous season and a 0.33 percent rise from March 2024 data. Productivity is expected to increase by 0.88 percent compared to the previous month's estimate but may still be 1.6 percent lower than the previous crop, at 1.87 kg per hectare. Consequently, Brazilian cotton production is forecasted to rise by 1.21 percent monthly and 14.8 percent year-on-year, potentially reaching a record 3.64 million tons.
Data from the United States Department of Agriculture (USDA), released on May 10, indicate that global cotton production for the 2024-25 season may total 25.919 million tons, marking a 4.8 percent increase from the 2023-24 crop. Global consumption is expected to rise by 3.1 percent compared to the 2023-24 season, reaching 25.442 million tons.