Competitiveness of Brazilian cotton strengthens with higher output and price edge

Brazilian cotton output is expected to rise largely, while in the meantime, global cotton consumption continues to weaken, so the oversupplied situation of Brazilian cotton during the harvest period is more obvious, and there is still downward space for cotton prices later. However, the trade friction makes China cotton imports from Brazil increase evidently. Besides, the Brazilian cotton has obvious price edge among cleared foreign cotton.

1. Obvious supply glut of Brazilian cotton
According to the data released by CONAB in July, 2018/19 Brazilian cotton output may reach 2.665 million tons, up by 32.9% year on year, to hit a historical high. Exports may move up by 60.3% to 1.5 million tons, above 1 million tons for the first time. Domestic consumption is likely to rise by 2.9% to 0.7 million tons. Therefore, ending stocks may rise by 70.7% to 1.135 million tons, for the first time to be above 1 million tons since 2011. The large increase of cotton output makes the supply glut more obvious. Compared with the data released in June, the consumption and exports are revised lower somewhat, leading to higher ending stocks. In early Aug, global stock and commodity market turns bearish, and CONAB is likely to revise lower the consumption and exports in Aug. Under the continual weakness of global cotton textile industrial chain, the supply glut of Brazilian cotton is more obvious with higher cotton output.