According to the Brazilian Cotton Producers Association (ABRAPA), the direct effect of the new subsidy package introduced by the United States Department of Agriculture (USDA) for US cotton farmers will be limited on Brazil.
USDA expanded the package of tax incentives and credit for American cotton on October 16. The package reinforces the Great American Cotton Plan, launched in June and organized around four pillars.
It includes expanding domestic cotton consumption; increasing domestic demand and production; improving trade in cotton; and lastly reducing production risks for farmers.
The economic adjustment program of the USDA will now pay 5 cents per pound of processed cotton, up from 3 cents previously. The Working Families Tax Cuts Act also raised the tax deduction limit for agricultural machinery to US $2.5 million.
For the 2026-27 crop year, the package raised the benchmark price for marketing loans to $0.55 per pound of upland cotton.
What changes for the Brazilian producer?
The country harvested 3.82 million tons of cotton lint in the 2025/26 crop year and is also currently the world’s largest exporter of the natural fibre with 34% of global trade.
Between the Brazilian marketing year of August 2025 and July 2026, cotton exports totalled 3.37 million tons, generating revenue of approximately US$5.3 billion.
Brazil’s progress has come sooner than expected as the goal of global leadership was only projected for 2030.
“In an increasingly challenging international landscape, increasing the presence and accessibility of Brazilian cotton is strategic,” Marcio Portocarrero, Executive Director of ABRAPA said.
Fernando Rati, manager of the Cotton Brazil Program at ABRAPA added, “The focus should be on strengthening the promotion of Brazilian cotton and expanding our presence in strategic markets.”
According to ABRAPA, the direct effect of the American package on Brazilian cotton will be limited, but it is monitoring indirect repercussions.
This caution comes amid an offensive that led Brazil to seek a reduction in the 37.5% tariff imposed by the US within the G20 trade bloc.
What happens now?
Starting in fiscal 2027, the US will release an additional $285 million per annum for the commercial promotion of agricultural products. On the Brazilian side, ABRAPA is betting on market diversification to sustain the pace of sales.
China accounted for 29% of Brazilian cotton shipments, followed by India and Bangladesh. ABRAPA is advocating for expanding trade alliances and is already projecting a record export volume for the 2026/27 harvest.
Image courtesy: IndiaMart
