Brazilian cotton farmers are mad at the United States because our growers are over-producing and pushing prices down. As a result, the Brazilians can’t expand their cotton acreage or increase their exports.
So, the Brazilian Cotton Producers Association has requested that a 115 percent tariff be placed on U.S. cotton imports to compensate its members for the “price distortions” caused by subsidies to U.S. farmers and to prevent “dumping” by U.S. shippers.
Excuse me, but talk about a case of the pot calling the kettle black.
It wasn’t too many years ago that cotton was a minor crop in Brazil. The Brazilian crop amounted to 200,000 to 300,000 acres per year with most of that being hand-picked when growers bothered to harvest it.
It wasn’t until New York cotton futures rose to more than $1 a pound in the mid-1990s that Brazilian farmers began to show interest in expanding their acreage and beefing up their production systems to make it a viable crop.
Now that those growers — who used low-interest-rate government financing to purchase mechanical cotton pickers and set up gins to process the crop — have gone through their first cycle of low prices, they’re trying to blame someone else for the world glut of cotton.
National Cotton Council of America officials aren’t having any of it, calling the Brazilian cotton farmer complaints “disappointing and completely inappropriate,” according to a press release issued from its headquarters in Memphis.
“The U.S. cotton industry is suffering from the very same low international prices cited by the Brazilians — and U.S. producers are reacting accordingly,” said NCC Chairman Kenneth Hood. “Estimates of U.S. plantings for the 2002 crop indicate the U.S. will reduce 2002 cotton plantings by 1 million bales from last year.”
That’s a bigger reduction than Brazilian farmers made in their plantings last fall (the growing season is reversed). ABRAPA, the initials for the Portuguese name of the Brazilian Cotton Producers Association, estimates planted area dropped from the equivalent of 2.53 million acres in 2000/01 to 1.89 million in 2001/02.
“It also is surprising that Brazil would attempt to target the United States, given that U.S. cotton exports to Brazil are virtually non-existent,” said Hood, a producer and ginner from Gunnison, Miss.
He said the United States shipped only 15,000 (480-lb.) bales of cotton to Brazil last year, accounting for 2 percent of the country’s cotton imports. Since the current marketing year began Aug. 1, the U.S. has exported about 18,400 bales to Brazil from the 2001 crop. U.S. merchants are expected to ship a total of 35,000 bales to Brazil during the current crop year, less than 4 percent of the 1.1 million bales Brazil is expected to import.
“It is surprising indeed for any country to argue that such a minute amount of imports has a damaging impact on local production,” Hood said. “It also is disappointing that some Brazilian growers would take the position that only U.S. growers shoulder the responsibility for any world production adjustment.
“All other major cotton-growing countries maintained or expanded acreage in 2001, resulting in a record world cotton crop at the same time that demand for cotton has stagnated because of a worldwide economic slowdown.”
“Focusing solely on U.S. producers and agricultural programs misses other key ingredients determining world cotton prices,” NCC President and CEO Gaylon Booker said. “For the past 18 months, most Asian currencies have decreased in value and are now more depressed than during the financial crisis of 1998. The result is soaring shipments of textile and apparel products from Asia and depressed prices at the retail level.
“The margins of the world’s yarn spinners and textile and apparel manufacturers have vanished,” he said. “This has placed added pressure on raw cotton prices, in addition to the pressure from large stocks. Furthermore, the increase in shipments of textile products from Asia has added to problems of sustaining domestic mill use in other regions of the world.”
The U.S. now imports the equivalent of 16.1 million bales of cotton annually in the form of cotton textile and apparel products, meaning that imports supply more than 75 percent of those segments of the U.S. retail market. U.S. mill use of cotton has fallen from 11.4 million bales in 1997 to 7.3 million bales for the current crop year.
As for U.S. subsidies, most countries support their domestic agriculture, either through government financing and export tax rebates as the Brazilians do or through direct payments as in the European Union.
“The cotton production world is replete with subsidies,” said Mark Lange, NCC vice president for policy analysis and program coordination. “Our economists estimate that at least 80 percent of the world’s production takes place under some subsidy arrangement or non-market intervention.
“The National Cotton Council hopes the Brazilian government will take a very close look at this request for intervention by some Brazilian growers. The U.S. cotton program is operated consistently with U.S. trade obligations. U.S. cotton exports to Brazil have been very small the last two years, and U.S. cotton acreage is predicted to decline significantly in 2002. Low world cotton prices have arisen from a wide array of factors that extend well beyond trade in raw cotton and the production decisions of U.S. cotton growers.”
It’s true that too much cotton on the world market has caused severe economic hardship for growers around the world, but the johnny-come-latelies to the world cotton community, such as Brazil and Argentina, must share in the blame for causing that situation to happen.