High surplus requires one more year of good exports

Cepea, January 15, 2020 – The volume of cotton that will be harvested in Brazil in the 2019/20 season will be four times higher than the domestic demand – in 2018, it was three times above the consumption and, up to 2017, it was equivalent to slightly more than the double. That means Brazil has conditions – and the need – to meet global demand during the year.


This scenario is explained by the stable area in the country. Although prices were almost 20% smaller in the second semester of 2019 compared to those registered in the same period of 2018, the attractiveness of the crop in relation to others, investments in machinery and equipment and anticipated contracts for 2020 and 2021 encourage producers.


Conab released a report in December indicating 1.64 million hectares of cotton area in the 2019/20 season, for an increase of 1.6% in relation to the previous. The average yield is estimated at 1,658 kilos per hectare (-1.6%), which may keep the national production at 2.73 million tons.


Mato Grosso is forecast to increase the area in 0.8%, to 1.101 million hectares; however, the productivity may decrease 1.1% (1,643 kilos per hectare) and production, 0.4%, at 1.809 million tons. For Bahia, Conab says the area will increase 5.4% compared to the 2018/19 crop, at 350 thousand hectares. In the same comparison, although productivity decreases 3.4% (1,738 kilos per hectare), production may increase 1.8%, totaling 608.4 thousand tons. Mato Grosso and Bahia represent 89% of the national production.


In 2019, Brazil shipped 1.61 million tons, according to Secex. This volume is also likely to be reached from August/19 to July/2020, when the 2018/19 product is available. For the 12 following months (Aug/20 - July/21), shipments may amount more than 2 million tons.  


One aspect that needs attention is the possible trade agreement between the US and China. Brazilian cotton exports have been favored since 2018 because of the trade war. Anticipated contracts for both domestic and international markets may certainly mitigate impacts in the short-term; however, in the mid and long run, China, the biggest purchaser of the Brazilian cotton, is likely to adjust trades.


In global terms, the USDA released a report in December indicating that the volume produced in the 2019/20 season may hit 26.4 million tons (+2.5% in relation to the crop before). World consumption is likely to be stable, at 26.19 million tons. Trades may total 9.7 million tons, with imports increasing 4.4% and exports, 7.4% compared to the previous season. Ending stocks are estimated at 17.49 million tons in the 2019/20 season, 0.8% in relation to 2018/19.





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