As Brazil’s new cotton harvest begins sporadically and farmers’ seed cotton “pre-sales” accelerate, some Brazilian cotton export companies and international cotton merchants have increased their quotations for Brazilian cotton cargo resources in 2022/23, striving for 85 cents/cent of the main ICE contract. More contracts will be signed and more sales will be made for pounds and above. Judging from the quotations of some international cotton merchants and trading companies, the Brazilian shipping schedule from August to December 2023 is M 1-1/8 (strong 28GPT), M 1-5/32 (strong 28GPT) ) basis are 13-13.5 cents/pound and 14-14.5 cents/pound respectively (quote: ICE 2312 + basis). It is understood that as of late May, the contracted exports of U.S. cotton in 2022/23 have been significantly “oversold”, and the unsold lint cotton is mainly low-grade and low-index (including 2020/21 and 2021/22 old cotton). The actual demand of textile companies is not well matched, and although trading companies still have a certain amount of Brazilian cotton in 2021/22, the indicators are low, the spinnability is poor, and the differences between batches are large, making it not suitable for spinning high-count yarns.
Several cotton textile companies in Jiangsu, Zhejiang, Shandong and other places believe that the current basis difference of Brazilian cotton for the August-December shipping date is still high, and cotton traders need to reduce the basis difference and facilitate transactions. Although the inquiry price of Brazilian cotton for the far-month shipping date is 3/ It picked up in April, but the real orders are still hanging in the air. The first is “output increases, exports decrease.” The Brazilian cotton yield and total output in 2022/23 are worth looking forward to, but export pressure is high. Brazil’s National Commodity Supply Company (CONAB) predicts that this year’s new cotton yield will be 118.2 kilograms per mu, a month-on-month increase of 5.9%, which is the second level on record. The total output is expected to be 2.901 million tons, a month-on-month increase of 167,000 tons, an increase of 6.1%. The Brazilian Cotton Exporters Association estimates that Brazilian cotton exports in 2022/23 (July to June) will be 1.55 million tons, a drop of more than 10% from the previous year’s 1.725 million tons; second, poor competitiveness. From August to December, Brazilian cotton cargoes are almost uncompetitive compared with US cotton and Australian cotton. According to quotations from several foreign merchants, the basis difference of Australian cotton M 1-5/32 (strong 29GPT) for the July/October shipping date is currently 13.5 cents/list (ICE 2307), and the basis difference with Brazilian cotton M 1 5/32 is only The difference is 0.5-1 cent/pound; while the basis of US cotton EM 31-3 36 is close to or even “in line” with Brazilian cotton; third, Brazilian cotton has a tradition of significantly lowering the basis before and after new cotton is launched. . Most Brazilian farmers “pre-sell” seed cotton one year in advance. Some cotton areas have not yet been sown, and the sales progress has exceeded 50%. Therefore, the pricing power of lint cotton is in the hands of processing companies, exporters, etc. (it is not simply sold based on lint plus cost + profit). Therefore, there is a common phenomenon that the basis of quotations in the early part of the year is high and transactions are slow; then the basis is adjusted significantly to stimulate transactions; fourth, compared with competitors such as the United States and Australia, the “stubborn problems” of insufficient storage capacity and high road transportation pressure at Brazilian cotton ports have been solved It’s not easy. Therefore, once the resistance to exports increases significantly, traders will be more willing to reduce the basis and ship goods.
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