According to a CEPEA report, the drop in Brazilian cotton prices in early May led to purchasers retracting and sellers holding on to prices.
“This scenario led to a disparity between asking and selling prices, reducing liquidity in the domestic market and even trades involving cotton from the new crop were weak,” the report said.
The CEPEA/ESALQ Index, for cotton type 41-4 and for payment in 8 days, which includes freight to São Paulo city, dropped 3.9 per cent by closing at BRL 2.09 BRL per pound or $0.70 per pound on May 15.
Quoting Conab data, CEPEA added that Brazilian cotton output might reach 1.5 million tons in 2015-16, 13.2 per cent down then the previous crop, with planted area also falling 12.8 per cent over the same period.
The state of Mato Grosso which accounts for 60 per cent of Brazilian cotton output, Conab has forecast a harvest 14 per cent lower than the 2014/15 crop from a 12.3 per cent reduction in planted area.
For the second largest cotton producing state, Bahia, Conab has projected a 10.2 per cent drop, here too down from a 12 per cent dip in planted area, but with a yield increase of 2 per cent. (AR)