Brazilian white gold: The appreciation of cotton

Brazil is the world's fourth largest cotton producer, behind India, China and the United States. Brazilian production, according to ABRAPA in the 2019/2020 harvest year, was 2,9 million tons, in an area of ​​1,62 million hectares, a record production, but with weakening demand.

Mato Grosso do Sul has been reducing the cotton planting area in recent harvests. The area in the 2018/2019 harvest was 37 thousand hectares, in 2019/2020 it was 32 thousand hectares. For 2020/2021 a reduction of over 20% is expected. In relation to the amount of feather produced, there was also a reduction over these three harvests, with an average reduction of 13%. Adverse climatic factors, low lint prices and high soybean and corn prices influenced the producer's decision to replace fiber with grain cultivation.

For the 2020/2021 harvest, an area reduction of around 12% is expected, reaching a total of 1,42 million hectares in Brazil and 23,5 thousand hectares in Mato Grosso do Sul. This movement should occur due to the incentive in production and marketing of soybeans and corn in the country. The exchange rate favorable to the external market, that is, a devalued real, increased external demand for grains, especially in the post-pandemic recovery. The price of cotton followed the appreciation of the dollar by 40%, matching the price of soybeans, but with a high cost to produce, consequently lower profitability, despite the rise in the price of lint.

The weakening of internal and external demand is a relevant fact for the reduction of area and production in 2020/2021, since a high stock without commercialization does not generate income for the Brazilian economy and causes a discount. The low consumption and low export of industrialized textile items also contributed to the expected reduction in the quantity to be produced, induced by the increase in the final price of inputs.

In the 2019/2020 harvest year, China was responsible for 90% of soybean imports and 30% of cotton imports from Brazil. Corn mainly served the European Union and Southeast Asia. High prices attracted producers to export in greater quantities, reducing stocks for domestic consumption. For the 2020/2021 soybean and corn cycle there should be an increase in the productive area, previously occupied by cotton production and degraded pastures.

Cotton exports in the 2019/2020 crop year are 1,95 million tons, exceeding the value exported in 2018/2019 by around 49%, and a value higher than Conab's estimate of 1,92 million tons. reaching second place as the world's largest exporter. Brazil already has 84% ​​of the 2019/2020 harvest already sold, and 44% of the 2020/2021 harvest as well, reflecting a market that is still thriving through early marketing. At the same rate, Mato Grosso do Sul exported 32,0 thousand tons from the 2019/2020 harvest, and has already started sowing for the 2020/2021 cycle with 57% already sold.

The high advance commercialization is based on the high level classification of national cotton, as the topography, climate and technology implemented in the cerrado for cotton production guarantee quality, sustainability and productivity; however, it faces competition from the synthetic fiber market and high production costs. In this way, the price of cotton becomes increasingly high, reflected in the consumer market, through the increase in the price of textile products, such as spinning, clothing and clothing; in addition to serving the production of edible oil and biodiesel. This scenario allows Brazilian cotton to be known as “white gold”, due to its high added value throughout the production process, from the field to the hands of the consumer.

Walter Schlatter, president of Ampasul