CEPEA/ESALQ Index for cotton in Brazil drops

Center for Advanced Studies on Applied Economics (CEPEA) reports that in late September, concerns regarding the world economy and cotton demand to absorb the international surplus were again in the spotlight in the cotton market. In Brazil, besides high supply, demand continued limited to small amounts. The export parity reduction also influenced domestic prices.

Therefore, liquidity remained low at the month end. While producers continued to accomplish contracts and more willing to trade in the spot market, purchasers expected new price drops and postponed higher volume acquisitions. However, the industry may have small stocks; consequently, agents are expected to resume trading higher volumes, as observed in August, when prices upped despite harvesting advances.

Players claim that they faced difficulties to find desirable-standard cotton for the industry in late September, since most of the production has a problem with micronaire. Besides, freight values continue at levels between 20% and 25% higher than those observed until July.

In September, the CEPEA/ESALQ Index for cotton type 41-4 (delivered in São Paulo city, payment in 8 days) decreased 5.95% and closed at 1.5788 real or 0.7781 dollar per pound on Sept. 28.