Brazil is heading into a potentially favorable turn in the cotton cycle just as the country wraps up its largest harvest on record. Cotton prices have risen more than 8% in New York since July, nearly doubling margins for some growers in Mato Grosso and strengthening the case for acreage expansion next season.
Margins for second-crop cotton growers in Mato Grosso have climbed to about 40% from 25%-26% in April, according to Francisco Queiroz, an analyst at Itaú BBA’s agribusiness consultancy.
That remains below the unusually high 70% margins seen in the 2019/20 and 2020/21 seasons, but is more consistent with historical averages, Queiroz said.
Improving profitability, combined with more attractive returns from a soybean-cotton rotation than from soybean-corn in Mato Grosso, has led Itaú BBA to forecast at least an 11% increase in Brazil’s cotton acreage in the 2026/27 season, to about 2.3 million hectares (5.7 million acres).
That would be a record, exceeding the 2.2 million hectares planted in 2024/25.
StoneX also expects acreage to increase, though by a more modest 5%.
“Two years of very low prices led growers to plant less,” said Raphael Bulascoschi, a market intelligence analyst at StoneX.
Higher cotton prices now give farmers a stronger incentive to plant. While production costs remain a challenge for cotton, corn growers are also facing cost pressure, making relative commodity prices increasingly important in planting decisions, Bulascoschi said.
The expansion will not be uniform across Brazil. BrasilAgro, which grows cotton in Bahia, expects to reduce acreage next season as part of an operational adjustment aimed at improving returns.
The company plans to avoid spending on older or rain-fed fields, where risks increase in an El Niño year, while planting more lower-cost corn to ease cash-flow pressure.
Queiroz said an increase in cotton acreage would not necessarily mean a corresponding decline in corn. Large farming groups that grow both crops may shift some land, but other growers are expected to expand corn acreage to meet rising demand, particularly from the corn ethanol industry.
Brazil’s current cotton harvest is nearly complete, with Itaú BBA estimating production at a record 4.2 million to 4.3 million metric tons.
Tighter Global Stocks
The improving price outlook reflects expectations for lower global production and resilient demand.
“The supply-and-demand outlook is much better,” Queiroz said. “Consumption is growing and inventories are falling sharply.”
Brazilian domestic cotton demand has remained at roughly 700,000 metric tons a year for several years, meaning export markets — particularly China — are driving incremental demand.
China accounted for 23% of Brazil’s record 3.4 million metric tons of cotton exports last season, while Brazil supplied about half of Chinese imports.
Itaú BBA expects that demand to remain favorable in 2026/27 as lower yields reduce China’s domestic crop, forcing the country to keep drawing down inventories while maintaining import demand.
Global supply is also working in Brazil’s favor. Among the world’s major cotton producers, Brazil is currently the only one expected to increase output this year. Production is forecast to decline in the US and China, while India’s crop, which is harvested through December, faces uncertainty related to El Niño.
“The market is betting on lower yields in the US and India, which suffered from high temperatures, as well as in China,” Bulascoschi said.
The US Department of Agriculture recently cut its forecast for global supply this year to 15.2 million metric tons from 16.4 million. The global stocks-to-use ratio is expected to decline to 56.8% from 62.2% last season.
That would mark a shift from the surplus conditions seen in previous years toward a tighter global balance.
“I wouldn’t call it a shortage, because the US and Brazilian crops are coming in,” Bulascoschi said. “But the balance is tight, and that could turn into a shortage if we run into problems.”
El Niño Risk
Weather remains the biggest uncertainty for Brazil’s 2026/27 crop.
El Niño could have a greater impact on competing producers such as Australia and India, according to Bulascoschi. But Brazil is not immune, particularly because much of its cotton is grown as a second crop after soybeans.
In Mato Grosso, Brazil’s biggest cotton-producing state, second-crop cotton accounts for as much as 95% of production, Queiroz said.
“Having the price is one thing; having the crop is another,” he said. “We are exposed to El Niño’s impact on the second crop, and there is no way to calculate yet how much production it could take away.”
Rainfall has been irregular in Brazil’s Center-West region, Queiroz said.
The outlook is more favorable in Bahia, where 46% of cotton production is irrigated, according to Agroconsult, and planting has been progressing at a good pace.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
