Market Trends of South America Cotton Industry
This section covers the major market trends shaping the South America Cotton Market according to our research experts:
Increasing Demand from the Textile Industry
- South America has some major textile-producing countries, such as Peru, Brazil, and Colombia. Peru is South America's biggest clothing exporter. In 2021, the Brazilian Textile Industry Association (ABIT) projected a recovery in domestic processing and manufacturing on the assumption of GDP growth of around 4% year-on-year.
- Based on ABIT, textile production grew to 2.03 million tons in 2021, an increase of 8.3% compared to 2020. Clothing production should rebound to reach 5.81 billion pieces, an increase of 23% year-on-year. Domestic sales are estimated to rise 10.5% for textiles and 25% for clothing.
- Post interlocutors indicated that factors powering Brazil's domestic textile and clothing manufacturing was aligned perfectly for the sector to reach progressive levels in 2022. On the industry side, since cotton prices are hitting record highs, the high raw material cost drastically cuts into the mills' margins. This has a compounding effect on the industry, which is already struggling with the Brazilian Real (BRL) currency devaluation - around 70% of the textile and apparel sector's operating cost is in foreign currency.
- The industry has no choice but to pass on the costs to consumers, who may cut back on purchases even more given the rising domestic prices. The global textile market is also increasing enormously, which is the key factor for Brazilian cotton exports. It is expected to grow further in the coming years.
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Brazil Dominates the Export Market
- Brazil is the leading cotton exporting nation in South America and the fourth-largest exporting nation in the world, exporting 56% of its production to the world. China, Japan, and Spain are the major export partners of Brazil, with 67.5%, 16.8%, and 15.4%of import value share, respectively. Brazil, Argentina, and Paraguay are the other cotton exporters in South America. The United States is one of the major import partners in Brazil.
- In recent years, the most significant growth in cotton cultivation has occurred in the Northeast Maranhao, Tocantins, Piaui, and Bahia (MATOPI) area and Brazil's north region. For example, production has taken off in Rondonia state in the last three years. Yet, despite notable gains in percentage terms, these regions are still far behind the two main producer states.
- Brazil would have to significantly improve export infrastructure for production to take off in the North and Northeast. 95% of Brazil's cotton exports are shipped via the port of Santos, in Sao Paulo state. It would be more cost-effective to ship cotton produced in the northern part of the country from ports in the North and Northeast - the so-called Northern Arc.
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