Brazilian cotton: Production is raised again, competitiveness needs to be improved

In its September report, the Brazilian Commodity Supply Company (CONAB) once again raised Brazil’s 2022/23 cotton production to 3.1501 million tons, an increase of 119,100 to…

In its September report, the Brazilian Commodity Supply Company (CONAB) once again raised Brazil’s 2022/23 cotton production to 3.1501 million tons, an increase of 119,100 tons from the August report, an increase of 600,100 tons from the 2021/22 annual volume, and a year-on-year increase of 23.53%. .

However, some Brazilian cotton processing companies and exporters judge that CONAB is still likely to continue to slightly increase cotton yields to historical highs, thus pushing up the annual total output. Currently, the latest forecasts of USDA and the Brazilian Cotton Growers Association (ABRAPA) for Brazil’s cotton production in 2022/23 are 3.026 million tons and 3.069 million tons respectively, which are significantly lower than CONAB’s forecast data.

Some international cotton merchants and importing companies said that in comparison, the data from the Brazilian Cotton Growers Association may be relatively more objective and closer to reality. CONAB’s output released in recent years has been affected by factors such as survey samples, prediction models, and high base numbers. Expectations were somewhat exaggerated.

According to statistics, Brazilian cotton export shipments in the second and third weeks of September were 63,500 tons and 54,100 tons respectively, which were lower than the same period last year. On the one hand, this was due to the impact of the 2022/23 Brazilian cotton harvesting, processing, transportation, The overall shipment has been delayed (the recent “crash” of exports of corn, wheat, soybeans, sugar, etc. in Brazil’s Santos Port has a certain impact on cotton shipping schedules); on the other hand, currently, Brazil’s domestic cotton farmers and processing companies, cotton exports There is a fierce stalemate between merchants and international buyers, and prices may face the risk of large fluctuations. Exporters and agents are currently mainly focusing on the export contracts signed in the early stage of performance. Therefore, the current spot liquidity in the Brazilian cotton market is still relatively low.

Cotton trading companies in Qingdao, Zhangjiagang and other places said that although the industry generally believes that China will still be the first market for Brazilian cotton exports in 2022/23, the price competitiveness of Brazilian cotton bonded, spot and far-month shipments still needs to be improved so far. , compared with Australian cotton and American cotton, Brazilian cotton is at a disadvantage in cost performance, so “reducing the basis difference and promoting orders” is the top priority. Judging from traders’ quotations, the basis difference of Brazilian cotton M 1-1/8 (strong 28/29GPT) for September 21-22, the September/10/November shipping date from China’s main port, is concentrated at 8.5-9.5 cents/pound ( Quotation: ICE2312 + basis); while the October shipping date of US cotton M 1-1/8 (strong 28GPT) basis is also around 9.50 cents/pound; the spot Australian cotton M1-1/8 (strong 30/31GPT) The basis difference is 10-10.5 cents/pound, and Australian cotton has the advantages of short transportation distance, low freight, and reduced interest costs for buyers.

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Author: clsrich