T
he cotton supply chain suffered
the impact of a 17.5-percent
drop in the national crop, due
to adverse climate conditions,
and also as a result of the low
sales prices stemming from the domestic
economic and political crisis, alongwith the
oscillations of the exchange rate and an in-
ternational scenario of declining demand. If
the 2015/16 growing season was not one of
the best, the expectation for 2017 is for the
farmers to make at least some profit, with
the season heading for a soft end.
In 2016, cotton production in Brazil
dropped to1.29million tons, and the reason
lies in the 2.2-percent smaller planted area
(954.7 thousand hectares) and 15.6-per-
cent inproductivity (1,350kgof lint per hect-
are), according to the National Food Sup-
ply Agency (Conab). Drought conditions at
planting and excessive precipitation at har-
vest resulted into losses. With smaller vol-
umes available for the negotiations, in light
of this scenario, exports dropped 6.5% in
2016, to 780 thousand tons. In the domestic
scenario,despitethedecliningdemand,and
also by virtue of the oscillation of the Amer-
ican currency, prices went up 22% fromDe-
cember 2015 to 2016, with theprice of anar-
roba ranging fromR$ 74.10 to R$ 90.48.
Conab anticipates a bigger drop in ex-
ports in 2017: 12.8%, with the volume to-
taling 680 thousand tons. It represents a
drop of 100 thousand tons. The ending
stock will reach 176 thousand tons, the
smallest over the past years. Asia is Bra-
zil’s biggest client, and China concentrates
53% of the global stocks.
The president of the Brazilian Associa-
tion of Cotton Producers (Abrapa), Arlindo
de Azevedo Moura, regrets the “below av-
erage” year. The cost for producing cotton
is R$ 8 thousand per hectare, big expens-
es and hefty investment, while soybean re-
quires R$ 2.5 thousand per hectare. There-
fore, starting or leaving the cotton farming
business is no easy task”, he summarizes.
The economic crisis took quite a toll on
the entire supply chain. One of the hard-
est hit sector was the textile industry, with
4,451 companies shutting down in São
Paulo alone, in 2015. In 2016, the damage
was smaller, but the sector continued ad-
versely affected. In order to resume do-
mestic consumption, Abrapa launched a
marketing campaign in an attempt to in-
crease by 11% the local cotton consump-
tion over a 10-year period and, projects a
gradual recovery of the economy as of the
second half of 2017.
Bruno Nogueira, analyst at Conab, says
that, by virtue of the reflection from the
commercial scenario of the 2015/16 peri-
od and the competition for area with corn
andsoybean, theareadevoted tocottonwill
shrink 5.5%, remaining at 902.3 thousand
hectares in the 2016/17 growing season. Fa-
vorable weather conditions should make
productivity soar 16.1%, to 1,567 kilograms
per hectare. Therefore, Brazil is supposed
to harvest 1.41 million tons, 9.7% more lint
than in the previous period.
Underanadversedomesticandforeignscenario,cottonfarmingin
Brazilhasbeenshrinking,buttheclimateisanticipatingabiggercrop
Softand
fluffy
COTTON
Betting on quality is the recipe for higher profits in 2017
Sílvio Ávila
20
