Trade deal and coronavirus on the agenda of Brazilian cotton farmers

Brazilian cotton producers remain attentive, but positive, regarding the facts coming from China this January

29.01.2020 | 20:59 (UTC -3)
Catarina Guedes

The Brazilian cotton producer is attentive, but remains positive in relation to the facts that dominate the international news in the last 15 days, and which focus on China. For the Brazilian Association of Cotton Producers (Abrapa), it is still too early to make a prediction about the effects, on the cotton market, of the end of the trade war between the United States and China and also of the coronavirus epidemic. The latter dropped, for three consecutive days, the prices of commodity last week. In 2019, Brazil reached second place in the world ranking of exporting countries, and China was the destination for 34% of the total national cotton shipped.

“Today, it is China that sets the pace for the global market, and, literally, a sneeze that comes from there can shake up the world economy. We believe that the trade deal does not put our position at risk, as the United States will have to be competitive to sell to China in the quantity and quality that they propose to buy. Our crop is already planted. We have to keep an eye on the news to guide our planting decisions for the next harvest”, says the president of Abrapa, Milton Garbugio. He explains that, in the last two years, Brazilian cotton has entered the Chinese market heavily, filling the void left by the USA, which, in turn, has sought new markets.

“Cotton production and consumption in the world are equivalent, at around 26 million tons of lint, with slightly higher production. We have 2 million tons that need to be exported and will be. It's a question of market rearrangement. But it is a fact that the Chinese like Brazilian cotton, which forces Americans to be competitive”, says Garbugio. He highlights the international marketing actions that Abrapa -through an agreement with the Ministry of Foreign Affairs MRE, via Apex, and (Anea) - is implementing to intensify the presence of Brazilian cotton in Asia.

As for the coronavirus, the president of Abrapa reveals that this is a greater concern for cotton farmers today, due to the fear that the epidemic will worsen and spread. High volatility marked the third week of January, when the first news about the Chinese epidemic emerged. In just three days, prices in New York varied between 69,12 and 71,25, closing the week at 70,05 cents per pound.

 Multilateralism

 In relation to the agreement between the United States and China, what worries Insper's agribusiness professor Marcos Jank most is the risk of breaking the achievements in regulating the world market achieved since the end of the Second World War, which had the WTO as its basis. main guiding forum. “We need to find out if this agreement is compatible with WTO multilateral trade rules. They were signed by all countries. How do the two largest economies in the world propose to seal a bilateral pact that can clearly harm other countries?”, he asks. “We went from the pursuit of free trade to the trade war. Now we are moving, after this agreement, to an era of managed trade”, he defines. Jank fears that to increase U.S. agricultural exports to China from $16 billion in 2019 to $36,5 billion in 2020, and $44,5 billion in 2021, it will be necessary to create privileged trade channels that do not will respect the free competition that currently reigns in the world market.

“China has Brazil as a strategic and important supplier. We need to closely monitor whether there will be a 'mandatory' movement that favors American cotton, considering that Brazil is competitive in price and quality at the same time”, assesses the president of Anea, Henrique Snitcovski. According to him, it is important to remember that American cotton represented practically half of China's imports before the trade war.

“On the other hand, China also increases its share of world imports, returning to the position of largest global importer in the 2018/2019 season, followed by Bangladesh and Vietnam”, he ponders. Also for the president of Anea, the biggest concern in the markets today is the possible impacts on consumption and movement of goods due to the coronavirus. “More than ever, this effort by the entities that represent the production and export of fiber, Abrapa and Anea, together with the Federal Government, is important to promote the product in the Asian market”, he concludes.


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