Producers signal to replace corn with cotton in MT

The biggest expense of a cotton crop is on phytosanitary products and, from last year to the present, the costs of fungicides, insecticides and herbicides have decreased by around 35% in Mato Grosso, the largest national producer of cotton wool. As a result, the Total Operating Cost benefited cotton farmers, and was accompanied by a certain stability in the commodity's sales prices in the last six months. Combined, the two factors lead to better profitability with the crop.

Corn prices have suffered a sharp drop in prices, with prices plummeting in recent months by more than 39%. Furthermore, the net margin for the 2023/24 harvest for cereals in the State also reduced, becoming unattractive. Even with lower fertilizer costs, corn producer profitability was being squeezed. The data comes from Agrinvest Commodities, which monitors the scenario with projections updated weekly.

Due to this situation, some producers have considered replacing corn with cotton in the second harvest or opting to reduce technologies to alleviate costs. In Mato Grosso, it is quite expected that large producer groups will substitute one crop for another, however, experts suggest considering some aspects before making a decision. To discuss the matter, they will meet at the opening panel of the XV Cotton Technical Meeting, of the MT Foundation, which will be held in Cuiabá, from August 28th to 30th.

With the theme 'Current and future scenario of cotton farming', the meeting will be at the opening panel of the event and will be attended by Alexandre Schenkel, president of the Brazilian Association of Cotton Producers (Abrapa) and Jeferson Souza, intelligence analyst at Agrinvest . Also participating are Alexandre De Marco, director of the Mato Grosso Association of Cotton Producers (Ampa), Rodrigo Oliveira, Agricultural Planning manager at SLC Agrícola and journalist Kelen Severo, who will mediate the moment. The panel will also address projections for the crop in Mato Grosso and how Brazil is developing in other markets when it comes to cotton.

For Souza, from Agrinvest, there are several factors that need to be considered when deciding to replace second-crop corn. “Cotton costs are practically three times higher than corn operating costs. In addition to the machinery being much more expensive, it is necessary to analyze the capacity of the cotton gins and logistics, as all of this directly impacts profitability. So, the risk and return of cotton is much greater because the investment is also greater”, points out the analyst.

Law of supply and demand

The global demand for lint and how much this can impact the cotton farmer's exchange rate and sales of the future harvest is another important aspect that will be brought up for debate. “Looking at profitability, today cotton has a better performance than off-season corn, however, costs are still high and it is still a market that is under tension. With the forecast of an increase in production in Brazil, it is essential to analyze the consumer market. If there is no response from the buyer's side to absorb this greater supply, there is a chance of a drop in cotton prices next year”, highlights Souza.

The concern is validated by the International Cotton Advisory Committee (ICAC), described in the latest Abrapa Harvest Report, at the beginning of August. The agency projects an increase of 530 thousand tons in global demand, estimated at 24,41 million tons, an increase of 2,2% compared to the current harvest. But, despite being positive, the projection shows weakening due to inflation in developed countries and the low shopping appetite of their consumers.

According to the report, in consumer confidence surveys, people report that they feel uncomfortable with the future of the economy and still perceive the pressure of higher prices. Although inflation has decreased significantly, the population has not noticed this fact on a daily basis. The impression, for them, is that prices still seem to be exceeding salaries, also in richer countries.

“So this is the big risk we have, which will be one of the discussions we will have at the Technical Meeting. The increase in area means more supply in the market, we will have to understand how the buyer will behave, looking at exports, domestic demand, all these movements. If the producer does not make the right fixes in advance, good risk management, it means that he may have a problem later on”, highlights the Agrinvest analyst.

The event

The Algodão Technical Meeting aims to disseminate research data from different institutions, present the MT Foundation's position, promote dialogue about bottlenecks in cotton farming, debate aspects of the harvest and plan the next one. There are three days in hybrid and in-person modalities, with lots of information for the production class and sector professionals to update themselves. Registration remains open and can be done here.