Report Highlights:

Brazil’s 2012/13 cotton production is estimated at 5.5 million bales on a planted area of 900,000 hectares, representing decreases of 27 percent in production and 32 percent in area compared to last year. Because of reduced yields due to pests and dry spells in the second ranked producing state of Bahia, Post reduced the national production estimate for 2012/13. Brazil is estimated to export 3.9 million bales of cotton in 2012/13. Post estimates 2012/13 cotton imports at 345,000 bales, predicated on the approval of a sector proposal for temporary removal of the import duty on an estimated 300,000 bales for contracts through the end of May, in order to supply industry demand. Under this presumed scenario, imports of U.S. origin cotton are estimated to reach 205,000 bales in 2012/13. Post forecasts 2013/14 production to increase slightly to 6.5 million bales based on improved yields on an increased planted area of 1,000,000 hectares. Post forecasts 2013/14 exports to decrease 55 percent to 1.85 million bales.

Brazil’s 2012/13 Cotton Production Estimated at 5.5 million bales 

Brazil’s 2012/13 cotton production is estimated at 5.5 million bales on an area of 900,000 hectares. Post’s estimate is in line with industry sources and incorporates reduced yields in the last month, due to pests and dry spells, in the second ranked producing state of Bahia. In its March survey, the Brazilian Ministry of Agriculture’s Food Supply Company (CONAB) estimated 2012/13 cotton production at 6.4 million bales and planted area at 967,000 hectares. The 2012/13 estimated production decrease of 27 percent when compared to the last two years will ensure adequate availability of cotton pickers and ginning capacities. In the past two seasons, deficiencies in harvest equipment, ginning capacity and export capacity adversely affected the quality of cotton. Both the 2010/11 and the 2011/12 crop were still being ginned well into the first quarter of the following year’s rainy season, further reducing the post-harvest quality of some cotton. As a result, Brazil’s long struggle to supply a consistent quality product to the international market was challenged even further these past two export seasons as they entered into new markets with record exports. Industry sources have indicated that inconsistent quality has affected Brazil’s ability to retain new clients. 

The top producing state of Mato Grosso, with over 50 percent of national production, sharply reduced planted area by 37 percent to 452,098 hectares, according to the state’s Institute of Agricultural Economics (IMEA). Mato Grosso planted a 30:70 ratio of first-to-second crop cotton in the 2012/13 season. Mato Grosso plants cotton during two different periods with three predominate row spacing approaches. First crop cotton accounts for 142,500 hectares and was planted in early December in 90 centimeter (cm) spaced rows. The second crop cotton is largely planted in either 90 or 76 cm spaced rows by January 25 or narrow-row spacings of 45 or 50 cm by February 20 and accounted for 272,983 and 36,584 hectares, respectively. The second crop plantings occur directly following the harvest of early maturing soybeans. Industry sources in Mato Grosso indicate that 500,000 hectares of planted area is an adequate level to ensure proper utilization of ginning and logistics capacities across the state in relation to other crops. Hence, the ginning season of the smaller 2012/13 crop should return to historic lengths and finish by the end of November. First crop (90 cm spaced) planting in December represents 55 percent of planted area. Second crop narrow-row (45 or 50 cm spaced) cotton has been established as a viable production model in Mato Grosso - expanding from 5,000 hectares in 2008/09 and peaking at 123,000 hectares in 2010/11. The Cotton Producer’s Association of Mato Grosso (AMPA) indicates that narrow-row cotton will always maintain a small presence as part of crop rotation schemes accounting for 7.3 percent of planted area in 2012/13. The cotton boll worm “helicoverpa armigera” has plagued the 2012/13 crop and reduced yields. It appears that in Mato Grosso growers were able to control this pest more due to more favorable weather conditions than those experienced in the second largest producing state of Bahia. 

Bahia is responsible for 30 percent of national cotton production. The 2012/13 crop in Bahia suffered irreversible losses due to dry spells that contributed to the infestation of the cotton bollworm “helicoverpa armigera.” Developing cotton bolls are being consumed by the pest, as well as developing soybeans in the pod, and significance in yield losses to both crops is still not determined. Effective pesticides against this particular species of corn earworm or cotton bollworm have been readily available outside of Brazil for a while. Producers have been applying various less effective approved pesticides and seen their costs double to US$200 per hectare this season. With over US$1 billion in estimated damages over the last two crop seasons, on March 14, the Ministry of Agriculture, Livestock and Food Supply (MAPA) issued an emergency measure to allow for imports of effective pesticides to bring the problem under control. The soybean crop has already suffered irreversible losses and concern has now shifted to the cotton crop that will be ready to harvest in less than 60 days. Producers in western Bahia are in their second consecutive season of significant crop losses and those financially overextended will be forced to sell some or all assets to mainly more capitalized, larger producers. The adjacent state of Piaui also has experienced dry spells of over 45 days and as a result, will have lower production of cotton and other crops in 2012/13. 

Outlook 2013/14: Increased Domestic Demand and Favorable Futures Prices to Slightly Increase Planted Area 

Post forecasts 2013/14 cotton area will increase to one million hectares, or an 11 percent increase compared to 2012/13. Production is forecast to increase to 6.5 million bales, representing an 18 percent increase over 2012/13, based on a yield trend of 1.4 mt/ha. China’s current minimum price regime set at levels equal to US$1.47/lb coupled with increased domestic demand have buoyed futures prices making cotton a viable crop choice in 2013/14 for large vertically integrated producers. Trade sources indicate that break-even production costs in 2012/13 for large vertically integrated producers are estimated at US$0.50-0.55/lb. The increase in the price of cottonseed, lower costs of an owned gin, access to cheaper financing, and other synergies serve to lower the break-even production cost. By comparison, the break-even production cost for a producer not vertically integrated is estimated to be between US$0.75-0.80/lb for 2012/13. 

Brazil continues to be deficit in fertilizer production. Studies show that Brazil’s dependence on imports reaches 65, 50, and 90 percent for nitrogen, phosphorus, and potassium, respectively. According to the National Fertilizer Association (ANDA), fertilizer deliveries totaled a record 29.5 mmt in 2012, up over four percent from 2011. Total annual imports of fertilizer in 2012 equaled 19.5 mmt, down nearly two percent from 2011. National production in 2012 equaled 9.7 mmt, down 1 percent from the 9.8 mmt produced in 2011. For 2013/14, fertilizer usage is expected to remain unchanged due to increased variable costs which face producers. 

Possessing 20 percent of the planet’s fresh water, Brazil has tremendous potential to expand planted area via irrigation projects that make possible second and third crops rotated over a yearly growing season. Currently, around 8.3 percent of all cropland is under irrigation, which represents 4.5 million hectares. Recent historically high crop prices have greatly improved the timeframe for return on investment with the main constraints being water use licenses and capital investment requirements. Large irrigation project investments are increasing cotton planted area and improving yields and quality. More recent supplemental irrigation schemes are bringing vast new areas into second or third crop rotation and improving yields and quality. For instance, post travel to western Bahia found 10,000 continuous hectares of a new supplemental center-pivot irrigation system to be planted next year with early-maturing soybeans followed by cotton. The producer indicated he that expects better quality control of the cotton as he will be able to plant later and shift the opening of mature bolls to after the heavy rainfall period and help avoid boll rot and damage. The rainy season does not normally accommodate two crops per year in this growing region; however there are sufficient ground water resources available for an estimated additional 200,000 hectares of second cropping under varying irrigation schemes. 

Biotech Cotton Seed Use Estimated to increase to 60-80 Percent in 2013/14 

Sources confirm the biotechnology adoption rate for cotton in Brazil in 2013/14 should reach 60-80 percent at par with most other cotton producing countries. Seed development firms and research institutions are awaiting import licenses for second generation double and triple-stacked trait seed varieties. MAPA is assisting in quickening the approval process for the import of seeds to help combat the cotton bollworm next season. Producers in the 2012/13 were left without adequate seed or chemical technology to combat a specific cotton bollworm that has reduced yields greatly. If the cotton seed imports arrive in time, trade sources estimate that 15-20 percent of the 2013/14 cotton area will be planted with second generation varieties that include two biotech events resistant to insects and one event tolerant to herbicide, such as Bollgard II with RRFlex. Limited seed quantities will not allow for area beyond this percentage to be planted with these varieties next season, and producers will turn to other biotech varieties that are solely resistant to insects, such as, Bollgard II and Widestrike. Single-event genetically-engineered (GE) varieties, such as Bollgard, will be planted even though these do not provide broad protection against regionally specific pests and disease. Under increased pest and weed pressure, producers appear willing to pay for the benefits of second generation double and triple-stacked trait seed varieties. Brazil’s National Technical Commission of Biosafety (CTNBio) has approved 12 biotech cotton events for commercial use. 


Brazil’s domestic consumption for 2012/13 is estimated at 3.95 million bales. 2013/14 domestic consumption is estimated to recover to 4.25 million bales, driven in large part by the hotel sector. Large investments are being made in preparation for Brazil’s hosting of the World Cup soccer tournament in 2014 and the Summer Olympics in 2016. 

The H5 textile industry concentration ratio for Brazil is estimated at 75 percent of total market share. The drastic oscillation in cotton prices in recent years has resulted in a permanent reduction of at least 15 percent in Brazil’s textile industry capacity. Since the beginning of 2013, domestic prices have already increased 36 percent, faster than international prices, and the industry is facing new challenges. Many are still recovering from high and volatile prices in recent years and have little access to financial credit and the federal government does not have financial programs available for the industry. Furthermore, the industry is able to fully pass on the significant input price increases to consumers. Textile production fell by 15 percent in 2011 due high prices and fell an additional 4.5 percent in 2012. In 2013 the textile industry is expected to recovery slightly with an estimate growth of 2-3 percent in output. Smaller textile manufacturers are also operating hand-to-mouth with an estimated 4-6 weeks of stocks-to-use ratio. With the cotton price returning to levels over $1.00/lb, there has been some increased substitution from natural cotton fiber to man-made fibers. Brazil enjoys one the highest cotton usage ratios in world with cotton representing 60 percent of all fiber usage compared to the worldwide average of 35 percent. However, the Brazilian Textile and Apparel Industry Association (ABIT) estimates cotton usage in the apparel sector will decrease from 60 percent to 50 percent in approximately 12 years. The apparel sector is forecast to grow by three percent annually; however, 2.5 percent of the growth will be attributed to cotton. Hence, the share of man-made fibers will increase from 40 to 50 percent in around 12 years. 

The textile industry reports that imports of ready-made clothing remain equivalent to over 100 tmt of cotton fiber in 2012, and continue to impact domestic production. It is shown that 60 tmt, or more than half of this increase, is derived from imports via tourism (70 percent from the United States) with each Brazilian tourist estimated to return to Brazil with clothing purchases equivalent to 10kg of cotton. 


Since the beginning of 2013, domestic prices have increased faster than international prices in the inter harvest period. This has been driven by increased domestic demand coupled with export demand. The University of Sao Paulo’s Superior Agricultural School Research Center (CEPEA/ESALQ) shows current domestic prices of over R$2.15/lb (US$1.07/lb), representing 41-4 type, delivered to Sao Paulo, have not reached this level since June of 2011, in nominal and real terms. These high current prices still pale in comparison to the record historic international highs of over US$2.30/lb reached in March 2011. International prices have settled at under US$0.90/lb, still very profitable given production costs estimated at between US$0.50-$0.80/lb this season depending on the producer’s level of vertical integration. Domestic prices have returned to levels around US$1.00/lb in the near term. Post expects domestic prices to continue around this level given the upcoming short-crop coupled with increasing domestic demand. 

The last time the minimum price for cotton was changed was before the 2003/2004 crop, when it was raised from R$33.90/15kg (US$0.57/lb) to R$44.60/15kg (US$0.75/lb). Brief price spikes above the minimum price occurred in early 2006, 2007, and 2008. A price increase of nearly 8 percent in 2007 prompted the government to sell 20,400 bales in stock and resulted in a 5.6 percent reduction in the domestic price. The government’s primary means of intervening in the cotton market during this time was by supporting the marketing of over 1 mmt of cotton through the PEPRO program