May 07, 2019

Increased Cotton Prod. Stimulates Cotton Harvester Sales in Brazil

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

Cotton production in Brazil is on the upswing and so are sales of cotton harvesters. The demand for harvesters is very strong, so if a Brazilian cotton farmer orders a cotton harvester today from John Deere, he probably will not receive it in 2019.

Brazilian farmers increased their cotton acreage 23% in 2019. The cotton was planted early and the weather has cooperated so farmers are optimistic about their cotton production. Even though recent cotton prices have been declining, Brazilian farmers have already contracted 70% of their anticipated production at higher prices, so they are basically assured of have a profitable year according to the National Association of Cotton Exporters (Anec).

As a result of the increased cotton acreage, Brazilian farmers have also increased their purchases of cotton harvesters. According to a spokesperson for John Deere, they are still delivering harvesters that were ordered last year. Some will arrive in time for harvesting this year, but some will not arrive in time for the 2019 harvest. Cotton harvester sales increased 30% in 2019 and John Deere indicated they cannot accept any more orders for 2019.

John Deere is basically the only supplier of the type of cotton harvesters utilized in the states of Mato Grosso and Bahia and they are imported from the factory in Des Moines, Iowa. Case IH makes cotton harvesters as well, but apparently they do not meet the local needs.

The cotton harvester market is relatively small with only 800 produced yearly in the world with Brazil receiving 150. In addition to being small, the market is highly variable depending on cotton prices. In 2018, cotton prices hit their highest level since 2014, but prices have since retreated to more normal levels. Fortunately, Brazilian farmers hedged much of their cotton production for this year and for next year.