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EU cotton policies of declining relevance in global cotton policy debate

08 December 2013

According to the US Department of Agriculture, “Greece’s cotton areas, yields and production have declined significantly” since the 2003 round of CAP reforms were implemented in 2006. These reforms “decoupled payments and reduced support for a number of crops, including cotton”. After a recovery in 2011/12, which saw production 42% higher than in the preceding year on the basis of “increased acreage and more effective pest control”, Greek cotton production for 2012/13 is expected to decline by 10.3%, following lower-than-expected yields as a result of poor weather and reduced use of fertilisers.

Greek cotton lint production 2011/12–2013/14 (ha, tonnes)

  2011/12 2012/13 2013/14
Area harvested 285,000 285,000 220,000
Production 290,000 260,000 220,000
Exports 261,000 244,000 171,000

Source: US Foreign Agriculture Service estimates, cited in USDA, GAIN Report IT1338

In 2013/14, the area under cotton is projected to fall almost 23%, while production is projected to fall by over 15%, taking production to 23% below the 2011/12 level. USDA reports that the Greek economic crisis is negatively affecting the cotton sector, with the absence of bank financing making it difficult for ginners and cotton cooperatives to maintain stocks and ride out low cotton prices. Given defaults and problems with deliveries last year, “international cotton merchants have decided to… buy only from the top ginners.”

Greece accounts for some 80% of EU cotton production, with nearly 78% of total Greek production being exported. Ninety per cent of Greece’s cotton exports go outside the EU, mainly to Turkey. However, Greek exporters are increasingly looking to non-traditional markets: in marketing year 2011/12, Greek cotton exports to China rose from 589 to 63,482 tonnes, and to Indonesia from 9,274 to 35,553 tonnes.

Greek cotton lint exports 2010/11–2011/12 (tonnes)

  Turkey China Indonesia Egypt Pakistan Extra-EU EU27
Aug–Jul 10/11 86,877 589 9,274 27,789 2,039 137,048 20,335
Aug–Jul 11/12 87,268 63,482 35,553 9,826 6,636 226,348 21,117

Source: Global Trade Atlas, cited in USDA, GAIN Report IT1338, 

Editorial comment

The current area under cotton in Greece is only 23% below the base area on which direct aid payments to cotton producers were estimated.  In 2013/14, the area under cotton will be 41% below the base area. While immediately post-reform the area under cotton in Greece rose by 4%, average yields fell by 24%. With a subsequent substantial decline in the area under cotton, Greek cotton production has fallen dramatically.

This strongly suggests that the process of decoupling of cotton sector support is having a major impact on the area under cotton and the overall level of Greek cotton production. Post-reform trends suggest that the Greek cotton sector is now much more responsive to world market price signals.

Against this background, EU cotton policies can be seen as having only a marginal impact on global cotton markets. While Greek exports to China in 2011/12 were equivalent to 9% of cotton production in Burkina Faso, they accounted for less than 1.5% of total Chinese cotton imports.

EU cotton policies would appear to be an increasingly irrelevant factor in cotton sector discussions in the WTO.


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