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December 8, 2017

Brazilian Cotton Acreage could increase 20% in 2017/18

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazilian farmers had a very good production year last year, but farmers were most pleased with their 2016/17 cotton crop. Not only did Brazil produce a record large crop, the cotton prices were very attractive as well. Both the soybean and corn crops in Brazil were record large in 2016/17, but the prices of both crops tumbled due to large world supplies.

Brazilian cotton farmers plan to take advantage of the good prices by increasing their cotton acreage in 2017/18 as they hope for good weather as well. Cotton planting is just getting underway in the two main cotton producing regions of Brazil - Mato Grosso and northeastern Brazil.

Mato Grosso is the largest cotton producing state and the vast majority of the cotton is produced as a second crop planted after the first crop of soybeans are harvested in January. A small portion of the cotton is full-season and farmers are now allowed to start planting the crop. In northeastern Brazil, the cotton is produced as a full-season crop planted during December and January in the states of Bahia, Piaui, Maranhao, and Tocantins.

The president of the Brazilian Association of Cotton Producers (Abrapa), indicated that cotton producers in northeastern Brazil are coming off a good year in 2016/17. Even though the cotton acreage declined 3% in 2016/17, the production increased 17% due to nearly ideal weather. Cotton yields in northeastern Brazil averaged 1,745 kg/ha in 2016/17. In addition to the good weather, cotton prices were strong as well in 2016/17. In northeastern Brazil, cotton out performed both soybeans and corn due to the higher prices for cotton.

During the 2017/18 growing season, Abrapa is forecasting that the Brazilian cotton acreage might increase as much as 20%, but the average yield might be lower than the record high yields of last year. Even with the decrease in yield, the Brazilian cotton production is still expected to be up as much as 11% compared to last year.

Attractive cotton prices have encouraged Brazilian farmers to be more active in forward contracting their anticipated 2017/18 cotton crop. Brazilian cotton farmers may have forward contracted as much as 50% of their anticipated production compared to the 30% which is normal for this time of the year. Even though input costs have increased 2-3% this year, Brazilian farmers are expecting to make a profit on their cotton production. Brazilian farmers sold their 2016/17 crop in March and April of this year in the range of 76 to 79 cents per pound. In recent days, the cotton price in Brazil was in the range of 72-75 cents per pound.

There is strong demand for Brazilian cotton especially from Asia and if the demand continues, Abrapa is anticipating that the Brazilian cotton acreage could double within the next five years.