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Background to reform of the EU cotton regime

20 May 2004

The EU support regime is centred on a production aid per tonne of
 unginned cotton within national guaranteed quantities. Aid is granted
 to processors, who pay a minimum price to growers, based on the
 difference between the 'guide price' and the world price. Since
 1995/96 the 'guide price' has been set at €1,063 per tonne
 with a guaranteed minimum price of €1,009.9 per tonne. Greece
 has a NGQ of 782,000 tonnes, Spain an NGQ of 249,000 tonnes and
 other member states a total of 1,500 tonnes. EU support to the cotton
 sector totalled €773 million in 2001.
The cotton sector contributes only 0.5% to final agricultural output
 in the EU, but is important in certain EU regions (Thessaly, Macedonia-Thrace,
 Sterea Ellada and Andalusia. For example in Greece, cotton represent
 9% of total agricultural output. In these areas cotton is farmed
 by small holders. The area under cotton however is decreasing.
At a world level the EU is a minor producer, contributing only
 2.2% of total production (the USA by contrast accounts for 20.1%
 of world production). The EU exports some 227,000 tonnes of ginned
 cotton and is a major net exporter of ginned cotton. The USA however
 dominates world cotton exports, accounting for 30% of world trade
 (west Africa accounts for only about 11%). The EU consumes about
 1 million tonnes of ginned cotton per annum.