Brazil Achieves Record Cotton Production Amid Global Supply Surge
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- Published: Sunday, 21 January 2024 00:56
In the 2022-23 season, Brazil has set a new benchmark in cotton production, reaching historic highs driven by expanded cultivation and increased productivity. Despite a global rise in cotton supply, a combination of sluggish demand and unfavorable economic conditions has resulted in bloated inventories and reduced cotton prices worldwide, as reported by the Center for Advanced Studies on Applied Economics (CEPEA).
During the offseason from January to May in Brazil, prices experienced a significant drop influenced by expectations of a robust crop and weak demand. With a surplus on the horizon, exports were anticipated to perform well in the 2022-23 season. However, early 2023 witnessed a slow pace in anticipated trades, as sellers found prices unattractive.
Between May and June, monthly average prices remained stable, but they hit the lowest level of the year in July. In the subsequent months, monthly averages fluctuated less, supported by exports that helped alleviate the domestic surplus. The year 2023 also brought logistical challenges and rising transportation costs, coupled with discrepancies in product quality, limiting trading, as highlighted in CEPEA's latest fortnightly report on the Brazilian cotton market.
In 2023, the CEPEA/ESALQ Index for cotton experienced a significant drop of 24.4%, closing at BRL 4.0230 per pound on December 26. The export parity between December 29, 2022, and December 26, 2023, decreased by 19.4%, influenced by an 11.5% decrease in the Cotlook A Index and an 8.6% devaluation of the dollar against the Real.
For the 2022-23 crop in Brazil, the National Company for Food Supply (CONAB) reported a 4% increase in the cultivation area compared to the previous season, totaling 1.664 million hectares. Productivity was estimated at 1,907 kilos per hectare, a remarkable 19.5% increase from the preceding season, setting a new record.
The projected production for 2022-23 stands at 3.173 million metric tons, approximately 14.57 million running bales (standard US bale weight of 480 pounds), marking a substantial 24.2% increase against the previous season and establishing a historic high.
Contrary to the trends observed in the United States and Pakistan, the global cotton production for 2022-23, according to the United States Department of Agriculture (USDA), recorded a 1.8% increase compared to 2021-22, totaling 25.395 million tons. This surge was sustained by higher supply contributions from major cotton-producing nations, including China, India, and Brazil.
While Brazil celebrates its record-breaking cotton production, other key players like the United States and Pakistan grapple with significant decreases during the same period. The intricate dynamics of global cotton markets underscore the delicate balance between supply, demand, and economic factors that shape the fortunes of this crucial agricultural commodity.