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With an eye towards the united states
With average prices in the New York Stock Exchange as high as US$ 0.87 per pound, in the first half of May 2017, it was a good
moment for the farmers to keep prices high. “However, it was an exaggerated and non-consistent price. Market foundations
show that it is possible to raise prices above the 2016 levels, but there will hardly be any chance for prices to exceed US$ 0.90 per
pound. The trend is for consolidating the price of US$ 0.80 per pound”, argues consultant Élcio Bento. He has it that prices in the
United States in August, when harvest begins, will dictate the behavior of the international quotes and, by extension, in Brazil.
Bento observes that, despite the receding global stocks for the third year in a row, they still amount to 18million tons of fiber,
half of it in China. Although there may be doubts about the quality of the fiber stored in the eastern giant, the fact is that there
are still 8 to 9 million tons of fiber above the amounts in the 2009/10 crop year, when international prices skyrocketed. The pro-
jections by the New York Stock Exchange anticipate prices of US$ 0.78 per pound in June 2017 and US$ 0.75 per pound in Octo-
ber 2017. “July contracts are important because they bring the commercial year to a close”, he concludes.
For his part, Arlindo Moura, president of the Brazilian Association of Cotton Producers (Abrapa), points to the fact that by the
end of May 2017 more than 65% of the Brazilian crop had been traded in anticipation. About 30 percent of the 2017/18 cotton
crop, to be planted at the end of the year, has already been negotiated in advance.
T
he smaller Brazilian crop, si-
multaneously with the reced-
ing global stocks, made it nec-
essary for the national cotton
market to adjust to a new reality
inthefirsthalfofthe2017calendaryear(Jan-
uarythroughDecember).Abroad,quotations
demonstrate gradual forward movement,
with minor surprises stemming fromChina’s
stock exhausting efforts. InBrazil, prices took
off andmade rather firmstrides, as a result of
scarceavailabilityoffiberinthe2016/17com-
mercial year (August toJuly).
With a 17.5-percent smaller crop in the
2015/16 season, which yielded 1.29 mil-
lion tons of fiber, against a forecast of near-
ly 1.49 million in the 2016/17 crop year, in-
duced the local companies to direct part
of their businesses to the internal mar-
ket, which paid higher prices. As the fal-
low period in Brazil and the world went by,
and with indications of a drop in the glob-
al stocks, along with exchange rate impli-
cations, prices in Brazil soared throughout
the first months of the year.
In April 2017, for example, the highest av-
erage price in Brazilian currency up to that
Market adapts to the new reality
ofofferanddemand,andpriceskeeppacewiththewindsof
themarket,butwithexpectationsofprofitsforthesector
Sílvio Ávila
Receding supply pushes up domestic prices, but harvest will trigger competitiveness
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