July 8, 2013

Brazil to Import 200,000 Tons of Cotton to meet Domestic Demand

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

Brazilian farmers reduced their cotton acreage by 36% during the 2012/13 growing season and as a result of the reduced production, the country will now have to import cotton in order to meet the demand of the domestic textile industry. The president of the Brazilian Cotton Growers Association (Abrapa) estimates that Brazil will need to import up to 200,000 tons of cotton during December 2013 and January 2014 to meet the domestic demand. Usually, Brazil is the third largest cotton exporter after the United States and India.

The Brazilian cotton production in 2012/13 is estimated at 1.25 million tons, but 450,000 tons have already been contracted by exporters. The demand for cotton from the domestic market is estimated at 1.0 million tons resulting in a deficit of approximately 200,000 tons. The domestic textile sector in Brazil is benefiting from a weaker Brazilian currency that has helped to spur textile exports by making Brazil's textiles more competitive.

Abrapa estimates that the average domestic price for cotton is R$ 68 per 15 kilograms while the international price is approximately R$ 62 per 15 kilograms. Additionally, Abrapa estimates that the cost of production for cotton is R$ 61 to 62 per 15 kilograms.

The state of Mato Grosso produces approximately 55% of Brazil's total cotton production and the cotton harvest in the state is in its initial stages. Bahia is Brazil's second largest cotton producing state (Bahia produces approximately 28% of Brazil's cotton crop) and yields in the state were adversely impacted during the 2012/13 growing season by dry weather and increased insect pressures.

A caterpillar moth, commonly known as the corn ear worm, has been found in the state for several years, but the insect did not cause much damage until this past growing season when it severely impacted the cotton, soybean, and corn crops in the state. The cotton crop in Bahia is expected to average approximately 3,300 kilograms per hectare in 2012/13 compared to a normal yield of 4,200 to 4,500 kilograms per hectare.

Due to strong demand, the cotton acreage in Brazil is expected to increase 20% to 25% during the 2013/14 growing season and it may be even more that that depending on the international price of cotton and the minimum price set by the government. The Brazilian government has not yet published the minimum price for the upcoming growing season, but it is expected to be in the range of R$ 61 per 15 kilograms.

Full-season cotton in Mato Grosso is generally planted during the month of December and safrinha Jb cotton is planted during January. The cotton in Mato Grosso is then harvested during July and August. In the state of Bahia, the cotton is generally planted during January and February and harvested during July and August. These two states combined are responsible for approximately 83% of Brazil's cotton production.