Brazilian Cotton Crop to Drop

WASHINGTON - Oct 21/05 - SNS -- Brazilian cotton production is expected to decline from 1.29 million metric tons (MT) this season to 1.15 million in 2005-06, according to a recent report from the U.S. agricultural attache for the country.

One of the principal challenges facing cotton producers is their heavy debt burden. Very healthy profits for cotton production from 2002 to 2004 encouraged producers to purchase additional land. According to Agrosecurity Consultoria, typical soybean/cotton land in Mato Grosso was purchased for about R$2,000 (U.S. $870) per hectare with a down payment of 25% and payments spread over seven years.

Center-West producers also invested heavily in tractors and harvesters under the Moderfrota program with payments spread over several years. Excellent profits in 2002-03 further encouraged growers to take advantage of the Moderagro government program whereby loans are taken to correct the soil and recoup degraded pasture.

With all this indebtedness incurred during the boom years and producers faced with large payments and the prospect of a second year of very low prices, Agrosecurity forecasts a negative return of 4.4% for cotton in 2005-06.

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