Market Analysis: Low End Inventory In Brazil Supports Cotton Price

 

Higher consumption, lower production and lower end of period inventory (Brazil and around the world) are likely to support cotton prices in early 2022, according to the Brazilian national commodity supply company on January 14. And since most of the crops have been closed in 2020 / 21, prices in the local market are likely to continue to strengthen and / or rise in the off-season.

Conab estimates that the end of period inventory in 2020 / 21 (December / 21) is 1.37 million tons, and that in the next quarter (December / 22 years) is 1.26 million tons, the lowest level since 2017 / 18 (1.02 million tons).

However, due to the uncertainty of population purchasing power and the price transfer to textile products, enterprises are cautious about bulk purchasing. Production is expected to increase in 2021 / 22. Participants in the cepea survey said that due to the more frequent rainfall this season, cotton planting in the second season is likely to take place in an ideal time, especially in the soybean growing area of Mato Grosso, Brazil's largest cotton producer. However, due to the rise in fertilizer prices, participants were concerned about high production costs.

Conab said Brazil's total output is expected to reach 2.7 million tons in 2021 / 22, an increase of 11% over the previous year and the third largest production in history. The planting area may increase by 12% to 1.542 million hectares, and the yield may reach 1756 kg per hectare (+ 1.5%).