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November 29, 2013

Cotton Competes for Corn Acreage in Brazil

Improved cotton prices and low corn prices have encouraged farmers in central Brazil to switch some of the intended safrinha corn acreage to cotton instead. Farmers in Mato Grosso are allowed to start planting their 2013/14 full-season cotton crop as of December 1st and they will plant their safrinha cotton in January after the first crop of soybeans are harvested. The planting window for safrinha cotton in the state generally closes by the end of January.

The Mato Grosso Institute of Agricultural Economics (Imea) expects the cotton acreage in the state to increase 28.5% to 581,000 hectares. The total cotton production in the state is expected to increase 21.5% to 834,000 tons. Mato Grosso is the largest cotton producing state in Brazil responsible for approximately half of the country's cotton production. The second largest cotton producing state is Bahia in northeastern Brazil. Most of the increased cotton acreage is expected to be in the safrinha production.

In recent meetings in Mato Grosso, the director of the Mato Grosso Producers Association (Ampa), Decio Tocantins, emphasized that the minimum price for cotton set by the government needs to be increased. The current minimum price was set ten years ago and production costs have increased significantly since that time. The minimum price for cotton is R$ 44.60 per 15 kilograms (called an arroba in Brazil) and Conab estimates that the variable cost for producing cotton nationwide in 2012/13 was R$ 56 per 15 kilograms.

Cotton acreage in the state has declined over the last several years due to low prices and increased competition from corn. During the 2012/13 growing season, the cotton area declined 37% compared to 2011/12 due to near record high corn prices. Due to excess corn production in the state, corn prices in the state have since fallen to below the cost of production and farmers are taking a second look at growing cotton instead.