Brazil is close to unseating the U.S. to become the world’s biggest cotton exporter as Texas, America’s top producing region, buckles under searing heat and drought.

The difference in cotton exports from the two countries is sharply narrowing amid a robust season in Brazil, adding the fiber to a growing list of crops where the U.S. is losing dominance.

The loss would be yet another blow to American agriculture. Brazil became the biggest corn exporter in the 2023 season and the leader in soy exports a decade ago. Russia and the European Union have overtaken the U.S. in wheat exports.

“If the U.S. crop continues to deteriorate, then Brazil could easily overtake the U.S.,” said Peter Egli, the director of risk management at Plexus Cotton. “They already match basically in the statistics. I could see that Brazil becomes the No. 1 exporter this season.”

The U.S. and Brazil are the world’s biggest cotton exporters, accounting together for more than half of the global supply. The U.S. is expected to export 12.5 million bales in the 2023-24 season, but that estimate is likely to be cut when the U.S. Department of Agriculture updates its forecast Tuesday. Brazil is forecast to ship 11.25 million bales.

Analysts expect the USDA to cut its export forecast as drought hit the crop and reduced the fiber’s quality. U.S. cotton quality “hasn’t been that good” in recent years because of droughts, while Brazil’s has “very good quality” because of its rain patterns, said Jack Scoville, vice president of Price Futures Group.

Cotton crop conditions in the U.S. are at their second-to-worst level ever, with 40% of the production in an area experiencing drought as of Friday. That includes nearly all of Texas, which had its second hottest summer on record this year with an average temperature above 85F, punctuated by heat waves. Only 11% of the state’s cotton crop was ranked as good or excellent, according to USDA data.

U.S. production in the current marketing season is set to fall just shy of 14 million bales, according to the USDA. That’s less than what the cotton industry’s infrastructure is built for, said Buddy Allen, the American Cotton Shippers Association’s president. Brazil is less than 1 million bales behind U.S. production, making it the country’s “most formidable competitor,” he added.

The South American nation is expected to continue ramping up cotton production and exports in the coming years. As corn prices tumble, farmers can decide to move part of their second crop area from corn to cotton. On current prices, margins are much better in Brazil compared with the margin of U.S. farmers.

“We are hearing that farmers are looking to increase cotton’s planted area for the next year,” said Cleiton Gauer, superintendent at IMEA, a state agency responsible for crop forecasts. “Since we cannot absorb all supply we will export more.”

 

Bloomberg’s Michael Hirtzer contributed to this report.

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