Brazil’s cotton production reached a historical high in the 2022-23 season, driven by expanded cultivation and productivity. Despite the increase in global supply, sluggish demand hindered by unfavorable economic conditions led to inflated inventories and a reduction in cotton prices worldwide, as stated in a report by the Center for Advanced Studies in Applied Economics (CEPEA).
From January to May in Brazil, despite being the low season, prices significantly decreased influenced by expectations of a good harvest and weak demand. With the surplus being higher, exports were expected to perform well in 2022-23. However, at the beginning of 2023, a slow pace was observed in the expected exchanges as prices were not considered attractive by sellers.
Between May and June, the average monthly prices remained stable but reached their lowest level of the year in July. In the following months, the monthly averages fluctuated less, supported by exports that helped reduce the domestic surplus. CEPEA reported in its latest biweekly report on the Brazilian cotton market that logistical problems and transportation costs increased in 2023, along with discrepancies in product quality, which limited trade.
In 2023, the CEPEA/ESALQ cotton index decreased by 24.4 percent, closing at BRL 4.0230 per pound on December 26th. Between December 29th, 2022 and December 26th, 2023, the export parity decreased by 19.4 percent, influenced by an 11.5 percent decrease in the Cotlook A index and an 8.6 percent depreciation of the dollar against the Real.
According to CONAB (National Supply Company), for the 2022-23 cycle in Brazil, the area increased by 4 percent compared to the previous season, reaching a total of 1.664 million hectares. Productivity was estimated at 1,907 kilograms per hectare, an increase of 19.5 percent compared to the previous season and a historical record. The production for 2022-23 was projected at 3.173 million tons of cotton, an increase of 24.2 percent compared to the previous season and the highest in history.
According to the USDA, global production for 2022-23 increased by 1.8 percent compared to 2021-22, reaching a total of 25.395 million tons, driven by increased supply in China, India, and Brazil. However, the United States and Pakistan experienced significant declines during the same period.
