Abrapa geopolitical debate and Asian market in the context of Covid-19

The virtual debate was attended by the Minister of Agriculture, Livestock and Supply, Tereza Cristina

30.06.2020 | 20:59 (UTC -3)
Catarina Guedes

Sustainable cotton – endorsed by the Responsible Brazilian Cotton Program (ABR) and the Better Cotton Initiative (BCI) –, traceability from the crop to the cotton gin, in addition to quality, good flow logistics and price competitiveness are advantages for Brazilian cotton farmers to fight for the market and increase the presence of the national plume in Asia, in a scenario that is not encouraging, due to the effects of the trade war between the United States and China and the Covid 19 pandemic. The conclusion was a consensus among the participants of the webinar Geopolitics and Trade: scenarios for Brazilian cotton in Asia, promoted, on Monday night (29/06), by the Brazilian Association of Cotton Producers (Abrapa).

The virtual debate was attended by the Minister of Agriculture, Livestock and Supply, Tereza Cristina, the Insper Agribusiness professor, Marcos Jank, from trader Swiss resident in China, Thomas Reinhart, as well as the presidents of Abrapa, Milton Garbugio, and the National Association of Cotton Exporters (Anea), Henrique Snitcovski. The webinar was mediated by Abrapa's director of International Relations, Marcelo Duarte. The event is part of the actions of the Brazilian Cotton Export Promotion Sector Project, signed between Abrapa and the Brazilian Export and Investment Promotion Agency (Apex-Brasil), to create an international promotion plan for Brazilian cotton in Asia, a region that is the destination for 90% of national feather shipments.

As decisive as the pandemic, for participants, is a definition of the trade war between the United States and China. By surtaxing American cotton by 25%, the crisis between the two countries opened an opportunity for Brazil to assume, for the first time, leadership in sales to the Asian giant. At the beginning of this year, however, the signing of an agreement between the two powers was supposed to put an end to the war. "O trade deal predicted that American exports would reach US$35 billion in 2020, but, so far, it has not reached US$5 billion. It is well below what was promised”, considers Marcos Jank. According to Jank, Brazil has benefited from the dispute in recent years, taking around US$10 billion from Americans in the Chinese market. The end of the 25% surcharge took away Brazil's advantage.

“Abrapa’s presence in Asia will cover seven to eight different countries. We will have to operate in Vietnam, Indonesia, Malaysia, Bangladesh, Pakistan, India, starting from Singapore. We saw that Brazilian exports doubled in the last two years, reaching two million tons, US$3 billion. Brazilian cotton is growing very significantly, and the physical presence is a promotion compared to the United States, which has been exporting for 200 years. I believe that, in ten years, we will surpass American cotton in exports, reaching first place in the ranking”, predicts Jank.

For Thomas Reinhart, if there is no agreement, Brazil will have a relative advantage in supplying cotton to the Chinese market. “But without a deal, the Chinese economy will suffer, and global demand will decrease, which is bad for everyone,” he said. He believes that if the first phase of trade deal If it comes to fruition, China will basically buy American cotton. “At current prices, Brazil is competitive compared to the United States, but spinning mill demand will remain weak until the end of the pandemic. For all markets, not just Asian,” he said. “Therefore, ABR/BCI sustainable cotton is a great asset for Brazil, especially since BCI is no longer certifying cotton from the Xinjiang region,” said Reinhart, referring to the problems encountered, especially in labor issues.

Minister Tereza Cristina emphasized the work that has been carried out by Mapa in opening and maintaining markets outside Brazil. According to her, there are currently seven agricultural attachés, and “one more”, who will be based in Singapore, where Abrapa is in the process of opening a representative office, as part of the project with Apex Brasil.

“The pandemic affected all production chains, but especially cotton. China's recovery, with a reduction in Covid cases, would already justify an increase in imports, although we are seeing a different movement of the pandemic, with second waves, in places that we thought were already stabilized, we will have to monitor this very closely , to know what’s coming”, he ponders.

Logistics

The effort to improve logistics for harvest flow, which Brazil had to undertake in the last three years, has become, according to Anea, a competitive advantage, which strengthens the country in this period of crisis. “Brazil managed to organize itself and has a strategic export capacity, since our transit time it's longer. This is the time for consolidation and strengthening. We have to seize this opportunity,” he said.

In his speech, the president of Abrapa, Milton Garbugio, stated that understanding geopolitics is now a priority for Brazilian cotton farmers. “That’s why the Asia project is so important for Abrapa. We are grateful for the support of Minister Tereza Cristina, Mapa, the Ministry of Foreign Affairs (MRE) and Apex, for making this strategy possible”, stated Garbugio.

LS Tractor February