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July 10
Upward trend weakens
After moving up 8.3 percent in June (due to small stocks and high demand),
cotton prices in the domestic market weakened in the second week of July.
Industries refrained from purchasing large amounts in order to prevent price
rises. Therefore, textile mills rearranged their activities to make use of their
own stocks or product received from contracts. As a result, liquidity decreased
significantly in that period.
During June 30 to July 15, the CEPEA/ESALQ Index for cotton type 41-4 (delivered
in Sao Paulo city, payment in 8 days) rose 1.27 percent and closed at 1.67 Real
or 0.9424 dollar per pound on Thursday, Jul. 15.
In general terms, industries reported difficulties to transfer price increases
to purchasers of manufactured products and of cotton thread. Most sellers, in
turn, kept focused on product quality and harvest yields. First ginned batches
should be allocated for the accomplishment of contracts and for contracts
involving trades with inputs.
Regarding supply and demand in Brazil, data from Conab (National Company for
Food Supply) forecast a slight increase of 0.4 percent of the cotton area of the
2009/10 crop in relation to the previous one, reaching 846.5 thousand hectares.
Production should increase 3.9 percent, to 1.26 million hectare.
Data from USDA, released on July 9, forecast an increase of 9.6 percent of the
cotton production in the USA compared to the forecast in the report released in
June. As a result, production should reach roughly 4 million tons, a significant
boost of more than 50 percent in relation to the supply of the 2009/10 crop. For
Brazil, the forecast is an increase of 2.9 percent, amounting 1.5 million tons;
for Uzbequistan, an increase of 4.3 percent, totaling 1.05 million tons.
All in all, world production of the 2010/11 crop should move up 13.1 percent,
reaching 25.3 million tons. Consumption should reach 26.1 million tons and world
trades should surpass 8 million tons. As a result, passage stocks should be 10.9
million tons, 2.11 percent less than that observed in the 2008/09 crop.
Regarding exports, in June 18.1 thousand tons of cotton was shipped, volume 93.6
percent higher than that exported in May and 72.6 percent more than that
observed in June 2009. In the accumulated of the year, Brazil shipped 135.5
thousand tons, 37.1 percent less in relation to the same period in 2009. In
terms of values, shipments in June averaged 0.7593 dollar per pound, hitting a
record high, considering all series of Brazilian exports collected since 1996.
(CEPEA/ESALQ/BRAZIL) |
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Lula: Brazil won The Arm Wrestling Match over U.S. cotton Subsidies
8 July 10 |
WTO |
Speaking on Thursday (8) to Brazilian businessmen and Zambians
in Lusaka, capital of Zambia, President Luiz Inacio Lula da
Silva used the example of arm-twisting between Brazil and the
United States because of subsidies from U.S. government for
cotton producers. The case illustrated the thesis of the
president of that African countries should seek their own
solutions, not dictated by rich countries to solve their own
problems.
"We won," said Lula. "Now,
between us winning and their complying, we had to fix an interim
measure with retaliation on American products, so they would see
we were not kidding," he said.
The President believes that the victory of Brazil is the fact
that last week, the U.S. government has deposited the first
tranche of U.S. $ 30 million, from $ 147.3 million each year
which shall be credited to the account of the Brazilian
Institute of Cotton (IBA).
This compensation fund to finance projects related to Brazilian
production of cotton was proposed by the U.S. to avoid
retaliation authorized by the World Trade Organization (WTO) in
November 2009 because of subsidies granted to producers by the
U.S. government.
In all, the retaliation could be up to U.S. $ 830 million,
including lifting of import tariffs and intellectual property
patents, which can be broken by Brazil. An agreement reached
last month between the governments of Brazil and the U.S.,
however, suspended the start of retaliation by the end of 2012,
when the United States must reshape its farm bill to limit
spending and subsidies to help reduce the program credit
guarantees for export of cotton.
The Cotton "soap opera" began in September 2002 when Brazil
asked the WTO to rule against U.S. subsidies given to its cotton
farmers, which caused distortion in international trade, harming
cotton farmers in Brazil.
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by COHA Research Associate
Felix Blossier - 1 June 2010
• While pressuring developing countries to adopt pro-trade
measures, the U.S. does not enforce its WTO commitment on cotton subsidies.
• By pointing out this problem Brazil asserts itself in the
international arena while the voice of African cotton exporting countries is not
heard at the WTO.
On April 20th 2010, a Memorandum of Understanding (MoU) was signed between the
two largest economies of the Western hemisphere, thus calming a decade-long,
sometimes rancorous, dispute involving Washington and Brasilia over the subject
of subsidies paid out by the U.S. to its cotton producers. By initiating a
U.S.-financed fund, which would be allocated to cotton producers in Brazil and
all over the world, this agreement was widely seen as resolving, once and for
all, the existing trade tensions between the two countries. But, at the same
time, the MoU can be seen in other, less charitable, ways as a token agreement
and as a refusal by the U.S. to reform its basic system and to comply with
international regulation.
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