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Exchange continues to flatten cotton prices in Brazil

Posted by Mateus Ramos

Image: Pixabay



The strong retraction of the dollar against the real continues to exert pressure on the domestic cotton market. In the CIF average of the São Paulo textile industry pole, the lint ended Thursday (24) quoted at R$ 4.72 per pound, retreating 1.76% compared to the previous day and at the lowest level since the last February 11th. In relation to the same period last month, it accumulated losses of 6.98%. In comparison with the same period last year, gains were still 72.9%.



“Compared to the total cost of production, current quotations guarantee margins close to 25% in the main producing regions”, evaluates SAFRAS & Mercado analyst, Élcio Bento. “This margin is still attractive, but it has already reached 40%, when the featherweight operated at its maximum levels of the season”, he ponders.

In FOB exports from the port of Santos, the indication was 94,73 cents per pound (c/lb) on the 24th, with a drop of 0,96% compared to the day before. “This quotation makes the Brazilian product 10,1% more expensive than the North American (spot contract) negotiated in New York”, remembers Bento. The day before, this difference was 9,6. A week ago, 9,7%. And, a month ago, 13,6%.

The 2021/22 Harvest Plan, released this Tuesday, did not bring anything very specific that directly affects cotton. "Cotton producers are large and the plan focuses much more on small", stresses the analyst.

“The main point that draws attention, negatively, is the rise in the interest rate”, highlights Bento. “However, the Selic, a benchmark for interest rates in the country, rose. So, this adjustment was necessary”, he explains.

Also according to the analyst, in relation to the R$ 1,4 billion released to aid in marketing, it seems that they will not be used by cotton producers. “There are no indications that prices will reach levels below the minimum established by the government”, he emphasizes. “In general, the plan was as expected and did not bring any great news”, he concludes.

By: Rodrigo Ramos | Safras & Mercado

This text was automatically translated from Portuguese.