The latest report from the U.S. Agricultural Counselor shows that due to the growth in cotton demand driven by the recovery of the global economy, Brazil’s cotton sown area is expected to be 1.6 million hectares in 2021/22, a year-on-year increase of 11%, and the yield is expected to reach 1,800 kg/hectare, which is higher than this year of 1,745 kg/hectare, and the output is expected to be 2.9 million tons, an increase of 400,000 tons year-on-year.
Overall, Brazil’s cotton area and output next season will still be lower than the historical highs in 2019/20, due to high production costs and good returns from competing crops. In the long term, Brazil’s cotton planting area will be significantly higher than the level of 1.4 million hectares in the past four years. Due to sufficient supply and lower exchange rates, Brazilian cotton exports will reach a new high, reaching 2.5 million tons, an increase of 100,000 tons year-on-year.
Affected by the epidemic, the Brazilian real exchange rate fell by more than 30% in 2020. Most analysts believe that the real exchange rate will remain low in 2021. The market expects the real to fall in 2021. The average exchange rate between the US dollar and the US dollar is 5.15 to 1, and the average exchange rate in 2022 is 5.13 to 1. As of March 25, the Brazilian real exchange rate against the US dollar was 5.66 to 1.
The sharp decline in the real exchange rate has a positive effect on Brazilian commodity exports. Statistics show that from February 2020 to February 2021, the price of Brazilian cotton increased by nearly 70%, reaching 4.79 reais/pound. During the same period, the US dollar price of Brazilian cotton increased by only 35%, reaching 88 cents/pound.
From the perspective of planting conditions, the area of Mato Grosso in Brazil can be expanded almost unlimitedly, and cotton can be grown in almost all soybean areas. IMEA predicts that the state’s cotton area may increase by 75% in the next ten years to nearly 2 million hectares, while the actual upper limit may be much higher than 4 million hectares. In contrast, the expansion potential in Bahia is very limited and there will be no significant changes in the remaining cotton-producing areas.
The report predicts that the global economic recovery will drive increased demand for cotton, and Brazilian cotton exports are expected to reach 2.5 million tons in 2021/22, a year-on-year increase of 4.5%. However, as there is still uncertainty about the epidemic trend, there are variables in domestic and foreign textile consumption, and the Sino-US agreement has also weakened the competitiveness of Brazilian cotton, there is a risk of downward revision of the export forecast.
From August 2020 to February 2021, Brazil exported a total of 1.72 million tons of cotton, a year-on-year decrease of 224,000 tons. </p
