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Insight | Time: Dec 10 2019 11:11AM
Will Brazilian cotton output keep up in 2019/20 season?
 
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In recent two years, Brazilian cotton output and exports have risen significantly, and plus the change of Sino-US trade relations, the market shares of Brazilian cotton improve evidently on international market. Therefore, the output change of Brazilian cotton has been an important factor to influence the global cotton supply. Through the analysis on planting areas, yield and output of Brazilian cotton, its output change mainly depends on the planting areas, and based on the rules of planting areas in recent years, Brazilian cotton output may be generally flat in 2019/20 season.

1. Change of planting areas to be an important influencing factor on Brazilian cotton output
The two important influencing factors on cotton output are planting areas and yield. Through the relations of planting areas, yield and output of Brazilian cotton since 1976, the three shows some relations.

Before 1996/97 season, planting areas of cotton crops have constantly declined from the high of 4.137 million hectares to 658,000 hectares, a fall of 84.1%. Later, planting areas recovered slightly overall, and reached 1.618 million hectares in 2018/19 season, up 146% from the low level, but much lower than the previous high.

There was positive correlation of 91.2% between planting areas and output during 1997/98 and 2018/19 seasons. It could been seen that after a sharp increase on planting areas, the yearly growth rate of planting areas would decrease evidently next year, and the growth rate might been negative. According to the change, the yearly growth rate of planting areas is likely to decrease in 2019/20 season, or even be negative. It may be related to the growers’ return. After the large input, and without obvious return, growers will maintain the normal production for next year.

Before 1996/97 season, yield of Brazilian cotton hovered at low level, and then yield improved gradually. In 2018/19 season, yield has grown by 215.8% from 1996/97 to 2,486 kg per hectare.

By comparison of the relations between yield and output, their correlativity was relatively low before 1996/97, at -22.3%, and up to 83% during 1996/97 and 2018/19.

Therefore, in recent years, the influences of planting areas are larger than that of yield on output.

Especially in 2017/18 and 2018/19 seasons, with the continual decrease of yield, the large rise of planting areas has pushed up the cotton output. Viewed from the correlativity, Brazilian cotton planting areas and yield may be flat in 2019/20 season, and the change on output may be also limited.

2. CONAB forecast in 2019/20
According to the CONAB’s Nov report, Brazilian cotton output is supposed to rise by 35.9% year on year to 2.726 million tons in 2018/19 season, and exports may rise by 43.7% to 1.40 million tons. In 2019/20 season, output may edge up by 0.2% to 2.731 million tons, and exports may rise by 42.9% to 2 million tons.
Brazilian cotton supply and demand, (CONAB, KT)
date beginning stock output import supply consumption export ending stock
2011/12 561.7 1,893.3 3.5 2,458.5 840.0 1,052.8 565.7
2012/13 565.7 1,310.3 17.4 1,893.4 875.0 572.9 445.5
2013/14 445.5 1,734.0 31.5 2,211.0 810.0 748.6 652.4
2014/15 652.4 1,562.8 2.1 2,217.3 670.0 834.3 713.0
2015/16 713.0 1,289.2 27.0 2,029.2 640.0 804.0 585.2
2016/17 585.2 1,529.5 33.6 2,148.3 685.0 834.1 629.2
2017/18 629.2 2,005.8 30.0 2,665.0 670.0 974.0 1,021.0
2018/19 1,020.9 2,725.9 5.0 3,751.8 700.0 1,400.0 1,651.8
2019/20 1,651.8 2,730.5 5.0 4,387.3 720.0 2,000.0 1,667.3
yearly growth 61.8% 0.2% 0.0% 16.9% 2.9% 42.9% 0.9%


In general, the major stimulus of higher Brazilian cotton output is the higher planting areas in recent two years, and based on the rules of planting areas, it may see limited improvement in 2019/20 season, and yield is generally flat in recent years. Therefore, Brazilian cotton output is likely to be relatively flat in 2019/20 season.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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