September 17, 2020

2019/20 Brazil Cotton Crop Record Large for Third Year in a Row

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazilian cotton producers have finished harvesting their third record cotton crop in a row. According to the Brazilian Cotton Producers Association (Abrapa), Brazil's 2019/20 cotton crop is estimated at 2.9 million tons of fiber, which is 5% more than 2018/19. The cotton is being processed at an accelerated pace and approximately 50% of the cotton has already had the seeds separated from the fiber.

The Brazilian domestic demand for cotton is 700-750,000 tons and the remainder will go into the export market according Abrapa. The devaluation of the Brazilian currency has been good for cotton exports and Brazil exports cotton twelve months of the year.

In September of 2018, Brazilian farmers were selling their cotton for R$ 7.02 per kilogram (US$ 1.70 per kilogram). In September of 2019, the price was R$ 4.76 per kilogram (US$ 1.31 per kilogram). Today, the price is R$ 7.05 per kilogram (US$ 1.32 per kilogram), which is basically unchanged from two years ago.

According to Conab, the cost of producing cotton in 2019/20 was R$ 7 per kilogram, which is basically the same as the current price, so Brazilian cotton farmers are having a hard time making a profit on their cotton.

As a result, cotton acreage in 2020/21 is expected to decline as Brazilian farmers switch some of their acreage to more profitable crops such as soybeans and safrinha corn. The state of Mato Grosso is Brazil's largest cotton producing state and the vast majority of cotton in the states is produced as a second crop following soybeans.

The safrinha cotton in Mato Grosso competes directly with safrinha corn for acreage. Domestic corn prices in Brazil are currently record high, therefore farmers in the state are expected to reduce some of their safrinha cotton acreage in favor of increased safrinha corn acreage.

The state of Bahia in northeastern Brazil is the second largest cotton producing state and cotton in that state competes with soybeans and full-season corn for acreage. A similar scenario is expected in the state of Bahia as farmers switch some of their intended cotton acreage to soybeans and corn instead.