The Brazilian cotton market showed price stability on Wednesday as producers and traders balanced supply and demand amid the close of sowing for the 2025/26 season. The Cepea/Esalq indicator registered R$3.5345 per pound, reflecting a 1.70% rise since early February, according to market monitors.
Analysts say the mix of a steady physical offer, selective selling of higher-quality lots and muted industrial demand is keeping quotations range-bound. Logistical pauses for the Carnival recess and cautious behavior from textile manufacturers have limited transaction volumes, reducing market liquidity but not triggering sharp price swings.
Cepea/Esalq Indicator at R$3.5345 Per Lb, Up 1.70% Since Early February
The Cepea/Esalq reference price for cotton fiber closed at R$3.5345 per pound on Wednesday, marking a 1.70% increase from the start of February. This indicator aggregates spot transactions and reported offers across producing regions, serving as a benchmark for domestic trade and export competitiveness.
While the percentage rise appears modest, it signals a subtle upward pressure after a period of flat trading. Traders interpret the movement as a reaction to selective selling and slight optimism from end-users, rather than a sustained demand shock that would push prices materially higher.
In practical terms, the current level provides a price signal for growers considering forward sales or holding stock. For exporters, parity calculations with dollar-denominated markets will determine the pace of shipments in coming weeks.
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Market Liquidity Constrained as Carnival Recess Delays Negotiations
Industry sources reported that the Carnival holiday created a short-term logistical pause, with many market participants postponing negotiations and transport operations. Brokers and buyers cited staff absences and curtailed port activity as reasons for delayed contracting and shipment scheduling.
Such pauses tend to reduce daily volumes and widen the gap between sellers’ asking prices and buyers’ offers. In the present episode, the recess compounded already cautious demand from textile companies, keeping transactions below seasonal averages despite the technically balanced supply.
The temporary lull may compress volatility in the immediate term but can also defer necessary price discovery. If downstream sales to mills do not improve after the break, postponed negotiations could resume under weaker consumption signals, pressuring prices later.
Conab Projects 3.8 Million Tonnes in 2025/26, A 6.7% Drop from Last Season
The National Supply Company (Conab) has estimated Brazil’s 2025/26 cotton production at 3.8 million tonnes, which would be 6.7% lower than the previous season but still the second-largest harvest on record. This forecast reflects both a smaller planted area and lower yield expectations compared with 2024/25.
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Conab attributes the lower output mainly to a 3.2% reduction in planted area—estimated at 2.018 million hectares—and an expected productivity decline of 3.6% to 1,884 kilograms per hectare. These adjustments may stem from crop rotation decisions, input costs, and weather-related stresses during key development stages.
For the supply outlook, a near-record harvest that is nonetheless smaller than the prior year suggests that while domestic availability remains ample, it is not expanding. This nuance helps explain why prices hold steady rather than falling sharply; the market has enough fiber to meet demand without signaling surplus-induced discounts.
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Planting Nearly Complete as Growers Finish Sowing for 2025/26 Season
Cotton farmers across Brazil are in the final stages of sowing for the 2025/26 campaign, according to field reports and surveys. The pace of planting influences crop uniformity and eventual yields, so the closing window is critical for agronomic management and projections.
Growers who completed timely sowing generally hope for normal development, while those who faced delays may encounter heterogeneity in crop stages. Agronomists note that later-planted areas can be more vulnerable to adverse weather or pest pressures, lowering average productivity at the national level.
Operationally, this phase also determines input use and credit flows, as farmers finalize applications of fertilizers and plant protection products. Sowing completion brings focus to crop monitoring and, later, to ginning logistics—key links for supply to enter the market.
Demand Muted as Textile Manufacturers Report Sales Below Expectations
Textile and garment producers have been monitoring manufacturing sales that, in several cases, are trailing expectations, prompting restrained purchasing of raw cotton. Companies cite softer consumer demand in certain export destinations and inventory adjustments as factors behind slower raw-material procurement.
Lower-than-expected off-take from mills reduces immediate spot demand and encourages sellers to hold onto attractive quality lots, creating a temporary stalemate. This behavior helps keep prices stable but curtails turnover, as market participants wait for clearer signals of downstream recovery.
Analysts explain that textiles’ purchasing patterns are cyclical and sensitive to retail trends; a modest recovery in apparel sales could quickly translate into firmer cotton demand. Conversely, persistent weak sales could prompt deeper price corrections when stocks are unwound.
Higher-quality Lots Maintain Premium; Sellers Selective About Offers
Sellers are showing firmness, especially for higher-quality fiber lots that command a premium on both domestic and export markets. Producers and cooperatives are negotiating selectively, preferring to hold premium material until they secure price levels that reflect quality and logistics costs.
This selective selling supports basis levels for top-grade cotton and helps explain why average prices have not declined despite softer demand. Buyers, in turn, face a narrower offering of premium lots, which can force them to seek substitutes or adjust processing lines.
The dynamic resembles a two-tier market: abundant average-quality supply keeps overall pressure muted, while scarcity of top-quality lots sustains premiums. For traders, managing this spread is essential to hedging strategies and contract fulfillment.
Outlook: Balance Likely to Persist but Weather, Export Parity and Demand Can Shift Prices
Market watchers anticipate that the current balance between supply and demand will likely persist in the near term, sustaining price stability. However, three main risks could alter this scenario: adverse weather affecting yields, shifts in export parity due to currency swings, and a rebound or further slowdown in textile demand.
In other words, the market is in a holding pattern where small shocks—such as a stronger dollar improving export returns, or improved retail sales lifting mill purchases—could move prices more decisively. Conversely, supply disruptions or weaker global demand would push prices downward.
For participants, the practical takeaway is to monitor weekly data from Cepea and Conab, track currency movements, and watch textile sales reports. As in other agricultural markets, stability today does not preclude volatility tomorrow; informed risk management will determine who gains or loses as conditions evolve.
Edvânia Almeida. Formada em Ciências Contábeis e Pós-graduada em Gestão Financeira: Auditoria e Controladoria pela FGV. Pequena pecuarista e apaixonada pelo Agronegócio e Gestão Estratégica.
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