Brazilian cotton market dragged down by COVID-19 pandemic
Brazilian cotton market dragged down by COVID-19 pandemic

Brazilian cotton market dragged down by COVID-19 pandemic

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Currently, the number of newly added and confirmed cases of the coronavirus pandemic in Brazil has been the top of the world, and the pandemic development still faces greater challenges due to underestimation of pandemic prevention and control, shortage of medical personnel and materials and social security, and insufficient implementation of prevention and control. Dragged down by the pandemic, with the good cotton production and lower exports, Brazilian cotton market is obviously oversupplied, and cotton prices face large pressure.

1. Brazil suffers huge challenges in face of the pandemic

According to the data released by the Brazilian Ministry of Health on June 1, as of 19:00 local time, there were 11,598 new cases of coronavirus confirmed, a total of 526,447 confirmed cases, 623 new deaths, and a total of 29,937 deaths. A total of 211,080 patients were cured. By now, the number of confirmed cases in Brazil has ranked second in the world. The Executive Director of the WHO Health Emergencies Programme said that Brazil has the largest number of new cases in the world in the past 24 hours, and the peak has not come. The research team at the University of Washington in the United States made a prediction about the outbreak in Brazil. The prediction stated that the number of deaths in Brazil by August is likely to exceed 220,000. If Brazil does not carry out various prevention and control measures in a timely manner, it is very likely that Brazil will surpass the United States.

Brazil faces multiple problems:

(1) Government officials have not taken efficient measures timely
Brazil did not take quarantine and lock-down measures in time after the first case of pandemic death occurred on March 17. The president stated that there was no necessary to be panic, and insisted on economy, without lock-down measures.

(2) Shortage of training of medical personnel and related materials
According to a survey of front-line medical personnel, Brazil's public health system personnel are under-trained. Only 22.3% of medical personnel have received sufficient training and are capable of treating patients with coronavirus pandemic, including mild and severe cases. A large number of first-line doctors have not received relevant training in the treatment of patients with coronavirus pandemic. Although WHO does not recommend the use of hydroxychloroquine against the coronavirus, the Brazilian Ministry of Health still insists on the use of chloroquine and hydroxychloroquine as treatment drugs.

(3) Insufficient implementation of pandemic control
5-1The main road of S?o Paulo has adopted traffic restrictions.
5-5Three cities such as Sao Luís were first closed. Within 30 days from May 5, except for transportation of materials and medical related vehicles, other vehicles are prohibited from entering and leaving the city, and residents must use masks
5-7Statewide requires people to wear masks on the street or in any public place
5-10Sao Paulo decided to continue the current quarantine measures after May 10
18 Brazilian states announced delays in their social isolation, most extended to mid-May
5-22The Mayor of Rio de Janeiro announced that the city will gradually relax social segregation policies in the next few days and gradually resume business and some service industry activities
5-23Brazil extends foreigners' entry ban by 30 days
5-27The Governor of Sao Paulo announced that it will continue to extend the isolation measures within 15 days from June 1, but will gradually resume economic activities in stages according to the severity of the outbreak in each city.
6-1Sao Paulo will enter the second phase of the restart on June 1, real estate and other business activities can be re-launched on the premise of observing the epidemic prevention regulations, and the shopping malls and street shops in Sao Paulo are reopened for 15 days.
However, the metropolitan area near Sao Paulo will still be in the first phase of the restart on June 1, allowing people to carry out basic activities and construction industry construction.

After the first case of the pandemic death occurred on March 17, Brazil began to take vehicle restrictions in Sao Paulo on May 1st, and on June 1, when the cases were in the top in the world, Rio de Janeiro and some other places began to accept applications for permission to reopen business.

Judging from the current attitude of Brazil's domestic high-level officials on the pandemic and the development, the Brazilian pandemic may continue to explode, facing very serious challenges.

2. Cotton market is dragged down
(1) Production continues to increase
In May, the official forecast for cotton production is at 2.879 million tons. The picking work has already begun in the State of S?o Paulo, and will begin in mid-June in Bahia, the second largest production area, and then in Mato Grosso.

(2) Depressed demand
As the number of new cases of COVID-19 continues to rise, retail stores in major cities are still closed, and some spinning mills have started working on shifts. In this case, the demand for raw cotton is still weak.

(3) Decline in exports
The export volume in the first 20 days of May was about 42,000 tons, and the export volume in May is expected to be 75,000 tons. Cotton exports were 90,600 tons in April. In May, China has procured a large number of US cotton. At the same time, Indian cotton also lured much interests due to the discounts offered by Cotton Corporation of India and the exchange rate. Brazilian cotton exports are impacted somewhat.
Brazilian cotton supply and demand (CONAB, KT)
DateBeginning stocksProductionImportSupplyConsumptionExportEnding stock
2016/175851530342148685834629
2017/1862920063026656709741021
2018/19102127792380170016691432
2019/20Jan149927555425972020501489
Feb143228242425871020001548
Mar143228542428871020001578
Apr143228802431469020001624
May143228791431265017001962

According to the latest data from CONAB in May, Brazil's cotton consumption in 2019/20 may fall by 40,000 tons from April's estimated value, exports will fall by 300,000 tons, and ending stocks are estimated to increase by 338,000 tons. The oversupply of Brazilian cotton is more obvious.

In summary, the number of newly added and confirmed cases of the coronavirus pandemic in Brazil has been the top of the world, and the pandemic development still faces greater challenges due to underestimation of pandemic prevention and control, shortage of medical personnel and materials and social security, and insufficient implementation of prevention and control. Dragged down by the pandemic, with the good cotton production and lower exports, Brazilian cotton market is obviously oversupplied, and cotton prices face large pressure.


Source: ccfgroup.com

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