Feb 27, 2020

Brazilian Cotton Producers and Exporters Expecting a Good 2019/20

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

Cotton producers and exporters in Brazil are optimistic that 2019/20 will be a good year for the cotton sector. That was the sentiment of participants at Brazil's 14th Harvest Prospective meeting recently held in Brasilia. The meeting was sponsored by the Brazilian National Association of Cereal Exporters (Anec) and the Brazilian National Association of Cotton Exporters (Anea).

Brazil's cotton production is expected to be very similar to last year when Brazil produced 2.8 million tons of cotton and exported 1.95 million tons.

From the producer's point of view, the first half of the 2019/20 growing season has been good. The cotton was planted within the ideal planting window and the weather has been beneficial thus far. The state of Mato Grosso is the largest cotton producing state in Brazil and over 90% of the cotton is planted as a second crop following soybeans. The majority of the cotton was planted during January, which is generally considered the ideal planting period.

The state of Bahia in northeastern Brazil, is the second largest cotton producing state and cotton in that state is planted as a full-season crop starting in December. The weather in Bahia was dryer than normal during November and December, but the rainfall increased in early January allowing for normal development of the cotton crop.

Another reason for optimism has been the record levels of Brazil's cotton exports. According to the President of Anea, during the second semester of 2019, Brazil set a record of exporting more than a million tons of cotton in six months. During that period they also set a record of 288,000 tons of cotton exports in one month. From last June through January of 2020, Brazil had already exported more cotton than in previous years and there are still four months left in the marketing year.

More than 85% of Brazil's cotton exports are destined for Asia, so Brazil probably benefited from the trade dispute between China and the United States, which is the world's largest cotton exporter. Therefore, there are some concerns about the potential impact on Brazil's cotton exports due to the Phase 1 trade agreement between China and the United States. There are additional concerns about the potential impact of the coronavirus on China's cotton imports.

Exporters are still confident that they can maintain a high level of exports in part due to the weaker Brazilian currency that has compensated in part for the softer cotton prices. The Brazilian currency is currently at record weakness trading at more than 4.4 Reals per U.S. Dollar.