December 28, 2010

High Prices Encourages Increased Cotton Acreage in Sao Paulo

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

Record high cotton prices convinced farmers in the state of Sao Paulo to take another look at cotton production. During the decades of the 1970's and 1980's, Sao Paulo produced more cotton than any other state in Brazil, but years of low prices, increased disease and insect pressures, and the ever expanding acreage devoted to sugarcane production convinced farmers in the state to move away from cotton production.

Cotton acreage in Sao Paulo is very small, estimated at 16,000 hectares, which is three times more than last year, but minuscule compared to the state of Mato Grosso where 700,000 acres are expected to be planted in 2010/11. The vast majority of cotton acreage in Sao Paulo is located in the southern part of the state in the municipality of Paranapanema where most of the increased cotton acreage came at the expense of soybean acreage.

Even though cotton prices are very good, no one is expecting cotton production in the state to return to its glory days of decades past due to the high cost of production in the state. According to the Sao Paulo Cotton Producers Association, cotton production cost in the state are estimated at R$ 4,500 per hectare (US$ 1,060 per acre) compared to R$ 3,800 per hectare (US$ 895 per acre) in the center west region of Brazil. The higher costs are attributed to higher land costs and the need to irrigate cotton in the region.

On the positive side, transportation costs are much lower in Sao Paulo compared to transportation costs from Mato Grosso.