Cotton prices buck the downward trend

After decreasing expressively over the last two months, the CEPEA/ESALQ Index for cotton (delivered in São Paulo city, payment in 8 days) registered highs in late May. However, in the accumulated of the month, the Index dropped 21.05%, closing at 2.3175 reais or 1.4667 dollar per pound on May 31.

Expressive decreases in Brazilian cotton quotes, observed especially in the first fortnight of May, encouraged purchasers to resume trading for prompt-delivery. However, sellers were more refrained, because they consider current prices low.

In late May, cotton quotes were firm in Brazil, underpinned by the higher interest of purchasers and by price increases in the international market.

Industries were more willing to trade in late May. Some textile mills, in need of small batches to keep production going until the entry of the product from the 2010/11 Brazilian season, ended up offering higher prices than in previous periods. Sellers, on the other hand, asked for even higher quotes.

According to data from ICAC (International Cotton Advisory Committee), the world consumption of cotton might be 25 million tons in the 2010/11 International season, almost the same level as compared to the 2009/10 crop. As for the 2011/12 crop, the world demand for the industry might increase, driven by the world economic growth and by the higher production.

CEPEA - Center for Advanced Studies on Applied Economics is a research center of the University of São Paulo located at ESALQ in Piracicaba, State of São Paulo. It is focused on agribusiness issues considering a diversity of related subjects: market analysis and price discovery, international trade, macroeconomics, management strategies, environmental and social aspects, entrepreneurship and family farming.