According to the export data of agricultural products from the Brazilian Ministry of Commerce and Trade, in April 2023, Brazilian cotton shipments completed 61000 tons of export shipments, which was not only a significant decrease from March’s shipment of 185800 tons of unprocessed cotton (a month on month decrease of 67.17%), but also a decrease of 75000 tons of Brazilian cotton shipments compared to April 2022 (a year-on-year decrease of 55.15%).
Overall, since 2023, Brazilian cotton has experienced a significant year-on-year decline for four consecutive months, significantly widening the gap compared to competitors such as US cotton, Australian cotton, and African cotton exports that have made significant progress. According to customs statistics, in February and March, China’s imports of Brazilian cotton accounted for 25% and 22% of the total imports of that month, respectively, while the imports of competitor American cotton accounted for 57% and 55%, significantly leading Brazil’s cotton.
The reasons for the continuous year-on-year decline in Brazilian cotton exports since 2023 (243000 tons of cotton exported from Brazil in the first quarter, a year-on-year decrease of 56%) are roughly summarized in the industry as follows:
One reason is that due to the insufficient cost-effectiveness of Brazilian cotton in 2021/22, it is at a disadvantage compared to American cotton and Australian cotton. Some Southeast Asian and Chinese buyers have turned to American cotton, Australian cotton, Sudanese cotton, etc. (In March 2023, the proportion of Chinese imports of Sudanese cotton accounted for 9% of the total imports of that month, while Indian cotton also recovered to 3%).
Secondly, since 2023, countries such as Pakistan and Bangladesh have encountered difficulties in executing signed Brazilian cotton contracts due to severe shortages of foreign exchange reserves, and both buyers and sellers of new inquiries and contracts have been very cautious. It is understood that the issue of letters of credit for cotton mill/traders in Pakistan has not yet been resolved.
Thirdly, the sales of Brazilian cotton in 2021/22 have come to an end, and some exporters and international cotton merchants not only have limited remaining resources, but also have low quality indicators that match the actual needs or matching of buyers, resulting in large textile and cotton enterprises not daring to place orders easily. According to CONAB, a national commodity supply company under the Brazilian Ministry of Agriculture, as of April 29, the cotton harvest rate in Brazil for the year 2022/23 was 0.1%, compared to 0.1% last week and 0.2% in the same period last year.
Fourthly, due to the continuous interest rate hikes by the Federal Reserve, the Brazilian real exchange rate has been continuously depreciating against the US dollar. Although it is beneficial for Brazilian cotton exports, it is not conducive to cotton importing enterprises from countries such as China, Southeast Asia, and South Asia.
Post time: May-09-2023