Downward trend remains in cotton market

Cotton prices kept the downturn in the Brazilian market in June. The nearness of the Brazilian season and refrained purchasers pressed down quotes in the domestic market. Cotton supply was still small; however, some sellers have accepted to trade at lower prices. Moreover, many sellers wish to sell off the remaining batches of the 2009/10 season.

The Center for Advanced Studies on Applied Economics - CEPEA/ESALQ Index for cotton (delivered in São Paulo city, payment in 8 days) dropped 17.27% in the accumulated of June, closing at 1.9173 reais or 1.2274 dollar per pound on June 30.

In the Central-Western region, harvesting activities moved on and new batches of the 2010/11 crop have entered the market, but in dribs and drabs. Until late June, plants were still operating with the product from the 2009/10 season.

As a result, season advances and the interest in trading in the spot market should dictate the pace of trades in the Brazilian market in the near future. While some agents surveyed by Cepea expect cotton growers to increase sales to make cash flow, others seem to be unwilling to step up trading, since the accomplishment of contracts will be enough to make cash flow.

Demand, on the other hand, remained sluggish, and purchasers alleged difficulties to transfer prices to manufactured products.

Center for Advanced Studies on Applied Economics–CEPEA