Significant decreases of futures contracts of cotton traded at ICE Futures have been concerning Brazilian sellers. The lower interest from China and expectations of a higher supply in Brazil as well as in the United States have been pressing down international quotes. Moreover, American stocks are still considered satisfactory, while the international demand remains refrained.
The July/2014 contract at ICE Futures tumbled 8.18% between May 30 and June 30. The October/14 contract dropped 4.86% in the same period, December/14, 5.11% and March/15, 3.63%. The July/14 contract resumed being traded at the lowest level since early December 2013, being also the smallest value for a first due date since the end of last year. In general terms, weather conditions are favoring the development of US crops, keeping perspectives of a good season in that country. In Brazil, the situation is mitigated by the parity based on the index for Cotlook A, which has not decreased at the same intensity of futures contracts at ICE Futures. However, international decreases might still be significant and dollar quotes have been dropping – the average was 2.198 reais on June 27, returning to the level observed on April 9 this year and the smallest since late October 2013. On June 30, dollar quotes rose slightly and closed at 2.21 reais. Now, prices in dollar in the US resumed being lower compared to values in Brazil, which limits domestic price rises. The index for Cotlook A, between June 23 and 27, moved down 1.52% compared to the previous week (June 16-20). In the same period, the dollar average decreased 1.3%. The export parity calculated by Cepea FAS (Free Alongside Ship) Paranaguá port averaged 1.7078 real per pound, dropped 2.9% compared to the previous. Considering the domestic market, in June, the CEPEA/ESALQ Index for cotton type 41-4 downed 1.1% and closed at 1.9066 real (0.8619 dollar) per pound on June 30.
In general terms, the demand has increased slightly. However, trading companies are more active in the market, offering batches from the 2013/14 crop, which press down domestic values. The market to export registered a small decrease in the pace of trades in June compared to May.
