Cotton Prices In Brazil Are Subject To End Inventory Shocks

2013 Cotton market The index shows the opposite situation. On the other hand, market players expect cotton prices to rise as cotton planting area is squeezed by food and cotton supply may decrease. On the other hand, some agents think that the final inventory is too high, which may suppress cotton quotes.

Bullish market participants are confident that supply will be reduced because next year the Northern Hemisphere cotton Planting area will be replaced by food crops. The situation in the southern hemisphere is clear, because the profit of cotton is lower than that of other crops. And demand is likely to continue to grow.

Against this background, China's position will be very important. China accounts for more than 47% of the world's inventory. The decision of the Chinese government is very important for cotton prices if China continues to import cotton. If China does not need to import cotton, then the international market trade may decrease, which will definitely affect the cotton price.

In November 2012, China imported 304 thousand tons of cotton, an increase of 11.6% over October, but 19.7% less than that in November 2011. In January -11, China imported 4 million 600 thousand tons of cotton, an increase of 79% over the same period in 2011.

2013 Brazil Cotton price It may remain stable because domestic production is reduced and exports are good, and the industry needs to purchase a large quantity. Retail sales continue to be strong, so higher exchange rates may be beneficial to the domestic cotton industry.

On the other hand, bearish market participants say high inventories may continue to affect prices. If China reduces procurement in the international market, cotton prices may be more affected.

Over the past two years, Brazil has seen excess cotton and 1 million 100 thousand tons of cotton. Therefore, domestic demand must be raised, or exports must keep pace at the same pace in recent months, with an annual export of about 1000000 tons. Nevertheless, in the medium term, the fundamentals of the market are very high.

In addition, considering the current price level of soybeans, corn and wheat, if the price of cotton is lower, cotton fields will be more crowded, which will reduce the inventory / consumption ratio and support the price trend.

On the other hand, as demand increases, supply decreases, inventories may fall, and prices may rise again.

The US Department of agriculture expects that China's imports will decrease by 53% in 2012/13, because domestic stocks remain high. The US Department of agriculture expects that consumption in China will decrease.

The world's total output may be 25 million 450 thousand tons, down 5.9% from last year. However, the world's consumption has increased, with a total of 23 million 180 thousand tons. Final inventory may increase by 15.1% to 17 million 340 thousand tons.