Potholes jarred Colorado City, Texas, cotton producer and National Cotton Council vice chairman Woody Anderson into the realization that once Brazil fills its road canyons, Brazil stands to become a major player in world cotton trade.

He saw enough American-size two-bale cotton fields and millions of acres of potentially new farmland between the weaves around those potholes to realize it may be only a matter of time before Brazil realizes its ambition.

While Brazil works to fill those potholes and otherwise improve its infrastructure to become a world cotton marketer to challenge China and the U.S., the Brazilians are trying to dig new potholes for American cotton producers in a trade dispute.

World trade issues have become the focal point of the National Cotton Council, and none is more nettlesome that the World Trade Organization (WTO) dispute Brazil has initiated against the U.S. challenging the federal farm program.

There is plenty at stake in the WTO dispute. That was why a U.S. cotton delegation that included Anderson visited the South American nation recently to see first hand Brazil's cotton production and its potential.

Brazil has already mastered the art of producing cotton, copying the U.S. model, Anderson told the Beltwide Cotton Conferences in San Antonio, Texas, recently.

Big operations in Mato Grasso

It is no small family farm industry, at least not in the state of Mato Grasso where 50 percent of Brazil's cotton is produced each year. There are only about 200 cotton farmers in Mato Grasso yet they account for 2 million bales of cotton production.

“This breaks down to 10,000 bales per farmer and at 2 bales per acre implies an average size of 5,000 acres of cotton, per farm,” said Anderson.

And, it is good quality cotton, with micronaire of 3.9 to 4.2 and 35-38 staple, said Anderson.

Anderson said the American cotton industry is very well known in Brazil. “It is quite clear that much of Brazil's cotton industry is patterned after our own. The producers we visited are very progressive and appear to be good businessmen,” said Anderson.

Brazil is a country of 173 million people. It is the second most populated country in the Western Hemisphere, second only to the 280 million in the U.S. However, Brazil's gross domestic product of $500 million is about 5 percent of the U.S. economy.

Through the ‘90s Brazil was a significant importer of raw cotton with annual imports of 1.5 to 2 million bales. However, those imports have dropped to about 500,000 and Brazil now exports a similar amount.

Brazil also has become a major exporter of textiles and apparel products to the U.S. In 2002 Brazil shipped just under 200,000-bale equivalents of textiles to the U.S. and early indications are that its exports will show a sharp increase when 2003 shipments are tallied.

Compete with China?

According to Anderson, one of the major textile mills in Brazil believes the country can compete with China in world textile products with Brazil's textile industry's productivity and low energy costs offsetting China's labor cost advantage.

Brazil has tremendous potential to increase its farming area to grow cotton. According to Anderson one mill executive said there is a potential to expand crop production by 200 million acres. By comparison, America's soybean, corn and wheat acreage totals 210 million acres.

And it is not all rain forests. In Mato Grasso Anderson said new farmland is broken out from pasture. Push out a few trees and its ready to farm, said Anderson.

Mato Grasso is about the size of Texas and Oklahoma and Texas combined. About 35 million acres are farmed in state covering 220 million acres.

And farming is cheap. On one farm the delegation visited, the grower produced 1,100-1,200-pounds of lint for $400 per acre, excluding machinery cost.

While the land is there, Anderson said infrastructure and transportation pose one of the biggest limitations to expansion.

“I can personally attest to the poor conditions of their roads after spending several days in the back of a van weaving from one side of the road to the other trying to dodge potholes,” said Anderson. “Over time, if these issues are addressed, we have to expect production to continue to expand.”

When the U.S. delegation was there, 60-cent cotton prices were not enough enticement to expand acreage this year. However, with a recent run-up in prices, that changed. Anderson expects the Brazilians to increase acreage 25 percent.

In the trade issue with Brazil, NCC president and CEO Mark Lange remains incensed at the country's WTO action. More specifically he is angry because two U.S. economists hired on to Brazil's payroll and prepared testimony against the U.S. in the WTO action.

Sumner, Babcock

University of California economist Dan Sumner, former assistant secretary of agriculture, was hired to assist in the case.

Lange added that Sumner “appears to have hired” Professor Bruce Babcock, an agricultural economist at Iowa State University and director of the Center for Agricultural and Rural Development (CARD) to attempt to modify the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri for use by the Brazilians.

“This action was taken without the knowledge of FAPRI,” said Lange.

Lange said Babcock receives federal funds for the CARD program and he pledged “a full examination of the actions of these two guys” once the WTO issue is settled. California cotton industry leaders and others have protested Sumner's actions to the dean of UC Davis school of agriculture and have lobbied for private research and scholarship funds to be withdrawn from the university in protest of Sumner's actions.

The WTO is expected to issue a ruling on Brazil's complaint in May. Lange believes the USDA and the U.S. Trade Representative along with the NCC staff have met every Brazilian challenge of the federal cotton program and the U.S. will prevail.

A lot more is at stake in the WTO action, said Lange. “I believe that this challenge extends beyond the U.S. cotton program and is a fundamental threat to the conduct of the U.S. domestic agricultural policy.”

e-mail: hcline@primediabusiness.com