Brazil : Cotton Growers Close Big 2004 Forward Sales

Brazilian cotton producers, primarily in Mato Grosso and Bahia, have already closed forward contracts to export nearly 150,000 tonnes of cotton that will be planted later this year and harvested in 2004, said growers.

Although still small players on the world market -- unlike Brazil's coffee, sugar, orange juice, soy and meats producers -- cotton producers seized on recent opportunities in world prices to pre-sell much of next year's expected exports.

The Agriculture Ministry expects this year's 2002/03 cotton exports to reach 185,000 tonnes, up from 107,000 tonnes the year before. Brazil is seen producing 829,000 tonnes in 2002/03, up from last year's 766,000 tonnes.

"People took advantage of the spikes in the futures market in recent months and for the first time we sold some of the (next) crop even before ending the harvest of this crop," Joao Luiz Pessa, a very large producer of cotton in Mato Grosso said.

The state's 2002/03 harvest, estimated at 409,000 tonnes, began about two weeks ago and should continue until early July. In the previous year, the state put out 391,000 tonnes, according to Brazil's Agriculture Ministry.

The forward contracts of the state's producers closed for prices over 54 cents a pound (FOB) for deliveries from July through December 2004, said Pessa. Exports in 2003 have earned on average about 42 cents/lb.

The contracts, which guarantee prices for producers in dollars, are not common on the local cotton market.

Pessa said the opportunity for Brazil to export in this way arose with the failure in output in Australia, a large exporter of high quality cotton.

"Australian cotton is better than ours because it is irrigated, but at least we have conditions to produce quality product in large volume," said Adilton Sachet, another large producer in Mato Grosso.

"For the buyer, it's an advantage to get cotton from only one place, with uniform characteristics," said Sachet, who closed a deal to export 7,000 tonnes next year -- about 60 percent of his intended output -- for an average 55 cents/lb.

Sachet said the exports will cover most of his outlay and he will sell the rest of his crop when prices are most appealing. He plans to use some of his expected returns to expand his cultivated area to 8,000 hectares from 7,000 ha.

With the advance of harvest in recent weeks, a pound of cotton has fallen to about 1.59 real domestically, a 15 percent fall from the beginning of May. ($1=2.94 reais)