Head of the Brazilian Cotton Growers Association: Brazil-China cotton trade may be settled in RMB in the future
China is the world’s largest cotton producer, consumer and importer country. In 2022, the United States and Brazil will rank as the top two sources of cotton imported by China. Marcelo Duarte Montero, CEO of the Asia-Brazilian Agricultural Alliance (ABAA) and director of international relations of the Brazilian Cotton Growers Association (ABRAPA), told a reporter from the Global Times on the 16th that Brazilian cotton’s impact on ChinaExportvolumes are expected to surpass those of the United States in the coming years, and may be settled directly in RMB.
Marcelo commented to a reporter from the Global Times during the 2023 China International Cotton Conference that China is the world’s leading cotton processing country, with annual consumption of about 8 million tons, but cotton production is about more than 6 million tons. Therefore, a considerable amount of cotton needs to be imported. In the past few years, Brazilian cotton has gained an increasing share in the Chinese market due to its quality.
Statistics released by the General Administration of Customs of China show that from January to April this year, China’s cumulative cotton imports were 382,000 tons. Among them, the US cotton import volume was 199,500 tons, accounting for 52.22%; the cumulative import volume of Brazilian cotton was 120,500 tons, accounting for 31.53%. In the past five years, China’s import demand for Brazilian cotton has continued to rise, and the proportion of Brazilian cotton in China’s imported cotton has expanded from less than 10% to about 30%.
Marcelo analyzed that the continued increase in Brazilian cotton exports to China is driven by multiple factors. For example, Brazil is working hard to improve cotton quality and yield, and there is a large amount of land available. Increase production. In addition, Brazil is less affected by climate problems than elsewhere in the world. “I think that in the next few years, Brazil can become China’s largest source of cotton imports.”
According to data released by ABRAPA, Brazil’s cotton production has more than doubled in the past seven years, increasing from 1.3 million tons in 2015/2016 to approximately 3 million tons in 2022/2023. In the 2023-2024 business season, total Brazilian cotton shipments are expected to be 2.2 million tons, a year-on-year increase of 18.4%.
Agricultural products have always been a key area of economic and trade cooperation between China and Brazil. Public information shows that China is Brazil’s largest trading partner and the main market for Brazilian soybeans, cotton and other agricultural products. During Brazilian President Lula’s visit to China in April this year, he was accompanied by a large business delegation of more than 200 people, including 90 representatives from the agricultural sector. Alexander Schenkel, head of ABRAPA, said at the time that closer cooperation between Brazil and China could push Brazil closer to its goal of replacing the United States and becoming the world’s largest cotton exporter.
During Lula’s visit, he also called for the use of RMB settlement among BRICS countries. On March 29 this year, China and Brazil announced a new agreement—trade between the two parties would be settled in their own currencies and no longer use the U.S. dollar as an intermediary.
Marcelo told the “Global Times” reporter that he noticed the agreement between the two countries on settlement in RMB, “this may be a way to the future.” Marcelo said that as far as he knows, the cotton trade between Brazil and China has not yet been settled in RMB, but this is only a matter of time and is likely to happen in the future.
Marcelo added that for Brazilian cotton farmers, there are still some problems in using RMB settlement. For example, they usually purchase agricultural inputs in U.S. dollars and use Brazilian reals in the planting process. Add the renminbi and you have three currencies. “If we can find a way for cotton farmers to buy agricultural inputs in RMB, then it will be easier to settle exports in RMB.”
During the 2023 China International Cotton Conference, the first batch of China Cotton Sustainable Development Project (CCSD) listed terminal products were also officially released. Marcelo believes that this is a good step for China’s cotton industry, “CCSD is a great work.” Marcelo said that countries including Brazil and the United States have their own cotton sustainability standards, and he also welcomed China to promote the sustainable development of cotton through CCSD.
It is understood that CCSD is a joint venture between China Cotton Association, China Chamber of Commerce for Import and Export of Textiles, China Cotton Textile Industry Association, China Home Textile Industry Association, and China Garment Association. The association was jointly launched in June 2021, with the concept of “environmentally friendly, high quality, respect for labor, and full traceability”, aiming to explore a sustainable development path that takes into account the economy, ecology, and society in the industry, and provide Chinese cotton with and the future development of the textile industry.
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