According to a report from Brazil’s National Commodity Supply Company (CONAB) on Wednesday, Brazil’s soybean production in 2019/20 is estimated to reach a record high of 122.2 million tons, corn production is 98.7 million tons, and cotton production is 2.75 million tons, higher than Last month’s estimate was 2.72 million tons.
The latest monthly reports of USDA and ICAC predict that Brazilian cotton exports will reach 1.916 million tons and 1.49 million tons in 2019. Some institutions and international cotton traders believe that despite the favorable support of the depreciation of the Brazilian real against the US dollar, the investment and expansion of the Santos Port, and the increased recognition of Brazilian quality and price by yarn mills and traders in China, Vietnam, Bangladesh and other countries, The export volume of Brazilian cotton this year may be difficult to exceed 1.9 million tons.
According to statistics from Brazilian government departments, China continued to rank first in Brazilian cotton exports in October and November 2019 (more than 900,000 bales in October; Brazilian cotton accounted for more than 50% of China’s total imports in November). Feedback from yarn mills in India, Bangladesh, Vietnam and other countries on purchasing Brazilian cotton is also relatively positive. Some Brazilian cotton merchants, international cotton merchants, and domestic import companies are full of expectations and confidence that Brazilian cotton exports will continue to “enclose territory and make rapid progress.”
However, the author believes that the growth of Brazilian cotton exports to China in 2019/20 can only be flat or limitedly optimistic. It is difficult to say that the future is bright. The reasons include the following:
First, in 2019/20, not only India’s cotton output has increased significantly, but its cost-effectiveness advantage has become increasingly prominent. India’s share of the Chinese market will rebound strongly. The recent rise in ICE has triggered a sharp rise in the quotations of US cotton, Brazilian cotton, West Africa, etc., while the quotations of Indian cotton have stabilized overall. Coupled with the depreciation of the rupee, the quotations of Indian cotton CNF (or CIF) are 3-5 cents lower than EMOT/MOT and Brazilian cotton. pound, the competitiveness has been significantly improved; Bangladesh and China are more active in inquiry and signing of Indian cotton on spot/shipping date;
Secondly, the first phase of the Sino-US trade agreement is about to be signed, and in the first half of 2020, China A large-scale purchase of U.S. cotton will be launched to significantly increase domestic cotton supply. According to the first phase of the agreement, China will import US$200 billion of US goods within two years, including US$40-50 billion of agricultural products. Some institutions and cotton companies estimate that the import target of US cotton this year may reach 800,000 tons, and the import target of Brazilian cotton will reach 800,000 tons. The Chinese market is blocking;
Third, Brazil’s poor road transportation, warehousing and shipping capabilities will seriously restrict the shipment and delivery of Brazilian cotton in the first half of 2020. Taking into account the large number of contracted exports of Brazilian cotton from October 2019 to January 2020, due to concerns about slow logistics links and the inability of Brazilian ginners to deliver goods on time, Brazilian exporters will perform contracts and suspend operations after March. Mainly taking orders. </p
