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July 21, 2011

Cotton Harvest Progressing Slowly in Mato Grosso

The huge cotton harvest in Mato Grosso is progressing slowly. As of late last week, approximately 18% of the cotton in the state had been harvested, which is 4% more than the previous week, but still 11% behind last year's harvest progress. One of the reasons why the percentage is slower than last year is because of the huge increase in cotton acreage in the state.

According to the Mato Grosso Institute of Agricultural Economics (Imea), farmers in the state planted 722,000 hectares of cotton in 2010/11, which was 66% increase over the previous growing season. Imea estimates that cotton production will increase 56% compared to the 2009/10 growing season. The early end of the rainy season and the late planting of the safrinha cotton are expected to result in lower yields compared to last year.

The cotton sector in Brazil is also in closely watching ongoing negotiations between the U.S. and Brazilian governments concerning suspension of payments ordered by the World Trade Organization. The WTO ruled in favor of Brazil in 2009 stating that the U.S. illegally subsidized cotton farmers and that Brazil was entitled to compensation.

Even though the ruling is not in dispute, the U.S. Congress recently passed legislation suspending payment to Brazil. The Brazilian government in response has threatened retaliatory action if the payments are not resumed. U.S. representatives are currently in Brazil negotiating a resumption of payments sometime in 2012 after the U. S. Congress writes a new Farm Bill. For the time being, the Brazilian government has not acted on retaliatory measures while negotiations are ongoing.