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USDA review of cotton sector developments in West Africa

12 August 2012

According to the latest USDA annual review of cotton production in West Africa, despite unfavourable and irregular rains in marketing year (MY) 2011/12, ‘seed cotton production may increase 40 percent’ (341,000 tonnes) compared to 2010/11. USDA also forecasts that seed cotton production is set to increase by 17% (205,000 tonnes) in the MY 2012/13 compared to MY 2011/12.

In MY 2011/12, production in Mali could increase by 83% to reach 445,000 tonnes as a result of government programmes to support production. These included a 38% increase in farm gate seed cotton prices, timely delivery of inputs at subsidised prices, and the settling of all farmers’ debts from the previous season. For MY 2012/13, a further 24% increase in seed cotton production to 550,000 tonnes is forecast by the government, but USDA expects this to be closer to 500,000 tonnes if good rainy conditions prevail. The privatisation of the operations of CMDT has not yet been completed, despite the selection of the Chinese company Yue Mei as the purchaser of two of the four subsidiary enterprises. The tender process may be reopened if ongoing negotiations with Yue Mei do not succeed.

In Burkina Faso, production could increase by 62,000 tonnes to 400,000 tonnes (+18%), although this is still only two-thirds of the government target of 600,000 tonnes. In April 2012, a major meeting was organised with cotton sector stakeholders to discuss ‘organisational and institutional arrangements in the cotton sector’, the ‘seed cotton farm gate price fixing mechanism’, ‘input supply procedures, pricing and credit’.

in Côte d’Ivoire, cotton production has suffered severely from earlier political turmoil, with revenues falling from US$200 million in 2001 to US$58 million in 2009. However, with a 37% increase to 240,000 tonnes expected in 2011/12, and with yields rising, a recovery in the cotton sector appears to be under way. In June 2011, the farm gate cotton price was increased by 26%, while input prices were reduced by 25%. USDA projects production of 300,000 tonnes in MY 2012/13.

In Chad meanwhile, ‘farmers were motivated to grow cotton after the government of Chad settled all debts owed to farmers from the previous campaign’, in addition to a 19.4% increase in the farm gate price and the timely delivery of fertilisers. It is anticipated that some 70,000 tonnes of seed cotton will be processed.

Poor rains in Senegal saw seed cotton production fall to 20,000 tonnes from an expected level of 50,000 tonnes, following a 22% reduction in yields and a 26% decline in the area under cotton, compared to the 5-year average. USDA projects seed cotton production of 30,000 tonnes in MY 2012/13 ‘if rainy conditions are good and yield improves’.

Seed cotton production: MY 2010/11 – MY 2012/13 (tonnes)

  2010/11 2011/12 2012/13
Burkina Faso 338,000 400,000 450,000
Mali 243,000 445,000 500,000
Côte d’Ivoire 175,000 240,000 300,000
Chad 52,000 70,000 100,000
Senegal 26,000 20,000 30,000
Total 834,000 1,175,000 1,380,000

Source: USDA, 18 April 2012, Table 1

At the beginning of June 2012, web-based analysts Agrimoney.com reported that cotton futures had fallen to their lowest in two and a half years (reaching a low of 66.1 US cents/lb at one point in New York), following reports of potential sales from Chinese stocks and warnings from the International Cotton Advisory Committee of reduced global consumption and an increase in world stocks to the record level of 14.46 million bales, some 61% of global consumption. Chinese policy decisions were held to be an important factor in cotton price volatility. Some analysts warned that with global demand sliding, prices could soon follow suit.

These market movements, reported Agrimoney.com, were in spite of earlier warnings of a 13% decline in Chinese cotton production and other risk factors that Commerzbank held were ‘currently being ignored’. 

Editorial comment

As the growth of West African cotton production owes a lot to increased producer prices and improvements in input supply programme, it remains to be seen what the impact of the rapid slide in global cotton prices (almost one-third below projected average prices for 2012 – see Agritrade article ‘ Short-term global cotton market trends’, 6 February 2012) will be on the financial sustainability of current policy initiatives to promote cotton production in West Africa.

The cotton producing countries in the franc zone chose to maintain 2012/13 purchase prices for cotton seed from the farmers at the previous year’s high level, while international markets fell significantly. A number of subsidised input programmes were also provided. These made for a policy to maintain and support the momentum of the revival in the cotton industry in 2010/11 after years of stagnation, at the risk of putting pressure on the finances of the cotton companies in the region. International cotton prices between 70 and 75 US cents/lb in 2012 will be adequate for the companies.

In Eastern and Southern Africa, particularly in Zimbabwe, Tanzania and Zambia, the fall in cotton prices in recent weeks have been causing discontent among producers, who are refusing to sell their cotton at new market prices. The price differential between buyers and producers is significant, potentially by as much as 100%. Negotiations are taking place, with some involvement of the regulatory authority.

For African countries, subject in the absence of their own processing industry in the region to world cotton prices, the increasing volatility of the cotton markets in recent years is making the revival of production more complex and stirring up conflicts.


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