According to Brazilian CONAB statistics, as of December 11, the overall cotton planting progress in Brazil was 47.0%, the planting progress in the previous week was 16.1%, and the planting progress in the same period last year was 6.9%. Due to the recent developments in Bahia and Mato Grosso, The weather is relatively suitable (Mato Grosso is expected to increase the cotton planting area in 2021/22 by 13.3% year-on-year), the Brazilian cotton index has set a new record and the export parity is still high, coupled with the sufficient supply of drought-resistant and insect-resistant cotton seeds, therefore The progress of cotton planting has improved significantly compared with previous years.
According to the forecast of the Brazilian National Supply Company, Bahia’s lint cotton production in 2021/2022 is estimated to be 534,800 tons, an increase of 5.6% over the previous year; if the weather is favorable in the first half of the year, the overall Brazilian cotton production in 2022 is expected to increase by 20% year-on-year.
Faced with the fact that Brazil’s cotton planting area and output are expected to increase significantly in 2021/22, and the US cotton signing situation is booming (driven by the recovery of textile and clothing production capacity in major countries such as Vietnam, Pakistan, Bangladesh, and Indonesia to pre-epidemic levels, 2021/ The trend of “more monks and less rice” for U.S. cotton in 2022 continues); not only is the quantity of Indian cotton available for export relatively limited, but also the export policy and lint quality are facing certain variables. So, can cotton textile companies and traders sign contracts in advance to purchase Brazilian cotton in 2021/22? ? Industry analysis has the following three disadvantages that buyers need to consider:
First, judging from the feedback from cotton-related enterprises in recent years, although the length, strength, grade and other indicators of Brazilian cotton have greatly improved compared with previous years, the short staple rate of lint is high and the differences between batches are large. The problem of low prices has not been effectively solved, so there is still a certain risk if you do not receive goods from large trading companies with good reputation and strong supply capabilities; second, not only has the freight rate of South American routes increased sharply since 2021, but also Santos and other The shipment of agricultural products and cotton at ports is greatly affected by cargo congestion. Both buyers and sellers are worried about whether Brazilian cotton can be shipped and delivered as scheduled in 2021/22. Third, the cost-effectiveness of Brazilian cotton in 2021/22 needs to be improved. For cotton companies, the attraction is not sufficient. For example, the current basis of Brazilian cotton M 1-1/8 for February/April shipping is stable at 17.5-19 cents/pound, while the basis for US cotton EMOT 31-3/31-4 36/37 for January/March shipping is The basis difference is only 16.5-17.25 cents/pound; the basis difference of Australian cotton M 1-5/32 is about 18-18.5 cents/pound.
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