International news: Brazil's cotton price decline intensified in April

Brazilian cotton prices have been falling since mid-February 2023. The downtrend appears to have intensified this month. Since April 4, the Brazilian cotton CEPEA/ESALQ index has fallen every day, and since March 31, the index has fallen by 10.5%. It had fallen 10.1 percent in March and fell 1.5 percent in February. Last week, domestic prices were lower than export parity for two consecutive days, the first time since July 25, 2022.

 

Both rising international prices and a stronger dollar could support Brazil's offer. However, while the dollar has strengthened over the past few days, foreign futures contracts have languished. As a result, sellers and buyers in Brazil were unable to agree on a price, resulting in low liquidity.

 

As for demand, cotton processors' agents reported low finished product sales, mainly due to the current global economic situation. Therefore, there are only sporadic purchases, just for replenishment of stock or immediate use. In general, agents believe that offers will continue to fall as new crops enter the market.

 

Although cotton prices have been weak, agents are now accepting previously purchased product at higher prices, which explains their caution in striking new deals in the spot market.

 

Sellers are worried about the continuous decline in cotton. This situation has led some farmers to withdraw supplies from the market. Demand for warehouses and expectations of higher production in 2022/23 will also affect offers.

 

From April 17 to 24, the cotton CEPEA/ESALQ index fell by 1.72%, closing at 4.1680 reais/lb on April 24, the lowest nominal level since January 8, 2021 (4.1260 reais/lb). The current monthly cotton index is 4% higher than the export parity.

 

In the international market, from April 17 to 24, the US dollar rose by 2.13% against the real, and closed at 5.04 real on April 24. The CotlookA index fell 3.67% in the past 7 days, and was 0.9330 US dollars / pound on the 24th. As a result, FAS (Free Alongside Ship) export parity fell by 1.6% to R$ 4.0899/lb in Santos and R$ 4.1005/lb in Paranagua on April 24.