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Africa’s Cottonin the World

ICAC & Gérald Estur

Seminar on Cotton in Africa6-8 September 2007, Arusha

The Importance of Cotton in Africa

• A vital cash crop for millions of Africans

• Major source of export earnings: –  3rd place after cocoa and coffee

 –  25 to 70% of total exports in several countries

• Engine of development

• 250 ginneries in rural areas

• Oil crushing mills & textile mills

0 3,000 Km

N

EW

S

2,000 to 40,000 tons

Producing countries

Production

< 2,000 tons

> 40,000 tons

Cotton in Africa Overview of the Cotton Sectorin Africa

• Produced in 37 countries out of 53

• 4.6 million hectares in 2006/07 (13.5% of world cotton area)

• 1.55 million tons (6% of world production)

• 25 exporters (18% of world exports)

• > 90% rainfed upland cotton

• Small-scale farms; labor intensive

• 100% hand-picked; mostly saw ginned

• Domestic consumption marginal (535,000 tons = 2% of world)

COTTON PRODUCTION

0

250

500

750

1,000

1,250

1,500

1,750

2,000

80/81 85/86 90/91 95/96 00/01 05/06

Franc Zone

Source: ICAC

Africa

Thousand tons

COTTON EXPORTS

0

2

4

6

8

10

80/81 85/86 90/91 95/96 00/01 05/06

Million tons

USAAfrica

Source: ICAC

World

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COTTON EXPORTS

India

12%

Australia

6%

Greece

3%

Brazil

3%

Other

12%

USA

34%

Uzbekistan

12%

Africa

18%

2006/07

Source: ICAC

World Exports

0

1

2

3

4

USA India Uzbek. CFA Zone Brazil Australia

05/06 06/07, est. 07/08, for.

Million tons

AFRICAN COTTON EXPORTS2006/2007

0 100 200 300 400 500

Burkina Faso

Mali

Benin

Zimbabwe

Cameroon

Egypt

Tanzania

Côte d'Ivoire

Chad

Zambia

Other

Source: ICAC

EXPORTS: CFA ZONE

0

400

800

1,200

80/81 85/86 90/91 95/96 00/01 05/06 10/11

EXPORTS:

EAST & SOUTH AFRICA

0

400

800

1,200

80/81 85/86 90/91 95/96 00/01 05/06 10/11

World Imports

0

2

4

6

8

10

91/92 95/96 99/00 03/04 07/08, proj.

China (M) R est of the World

Million tons

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COTTON IMPORTS

EU

6%

Thailand

5%

Russia

4%

Other

9%

Turkey

11%

Bangladesh

7%

China

29%

Mexico

4%

Other Asia

13%

Pakistan

6%

2006/07

Source: ICAC

Indonesia

6%

Is African Cotton Competitive?

• Constraints

• Productivity

• Costs of production

• Quality

Major Constraints

• Landlocked cotton areas• Cost of transportation• Uneducated farmers• Lack of equipment• Low inputs• Low productivity

• Particularly sensitive to market fluctuations: –  Export dependent –  Price takers –  Local processing uncompetitive

 –  Impact of exchange rate• Lack of technical expertise & market knowledge• No subsidies except emergency

• Political instability

Cotlook A IndexSeason-average (US cents/lb)

25

40

55

70

85

100

73/74 81/82 89/90 97/98 05/06

average 73/74 – 97/98 =74 cents/lb average 98/99 – 06/07 =

56 cents/lb

77

59

68

Causes of Long Run PriceDecline:

• Technology Change (50%)

• Polyester (25%)

• Retail Prices of Apparel

• Government Measures

Biotech Cotton

47

1216 17

21 2225

29

3640

0

10

20

30

40

50

97/98 99/00 01/02 03/04 05/06 07/08,

proj.

% of World Cotton Area

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400

500

600

700

800

82/83 87/88 92/93 97/98 02/03 07/08,

for.

World Cotton Yield

Kg of lint/ha

756

647

751

Cotton Yields

World: Avg. Increase 13 kg/yr

Africa: Avg. Increase 1 kg/yr

200

400

600

800

80/81 85/86 90/91 95/96 00/01 05/06

Kilograms/Ha

Cotton picking in the U.S. today

Cotton picking in Africa todayCotton picking in the U.S

. in the early 20th century Productivity (2005/06)

USA

• < 25 000 cotton farms

• 80% irrigated

• Mechanized, capital intensive

• 230 hectares / farm

• Ginning ratio 37%

• 5.2 million tons lint

• 930 kg lint/ha

• 215 tons lint per farm

• 900 ginneries

African Franc Zone

• > 2 million

• 100% rainfed

• Manual, labor intensive

• 1 ha / farm

• 42%

• 0.9 million tons lint

• 390 kg lint/ha

• < 0.5 ton lint per farm

• 85 ginneries

Nominal Exchange Rates

50

100

150

  A  p  r  -  0

  2

  O c   t  -  0  2

  A  p  r  -  0

  3

  O c   t  -  0  3

  A  p  r  -  0

  4

  O c   t  -  0  4

  A  p  r  -  0   5

  O c   t  -  0   5

  A  p  r  -  0

  6

  O c   t  -  0  6

MZM

TZS

UGX

XOF

ZMK

Domestic Currency vs USD (April 2002 = 100)

Source: IMF

Cotlook A IndexUS cents/lb

0

20

40

60

80

100

80/81 88/89 96/97 04/05

0

200

400

600

800

1,000

1,200

$

CFA

CFA/Kg

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CFA Cotton Prices

CFA/kg Lint

0

400

800

1,200

80/81 88/89 96/97 04/05

ProducerPrice

A Index

Cotlook A Index

US cents/lb

0

20

40

60

80

100

80/81 88/89 96/97 04/05

0

400

800

1,200

1,600

2,000

$

TanzaniaShillings

Shillings/Kg

Cotton Market Shift in India

• 2001/02:

2nd largest importer: 500,000 tons

•2007/08:2nd largest exporter: 1.1 million tons projected

Cotton in India

2

4

95/96 00/01 05/06

Million Tons

Mill Use

Production

Source: ICAC

Cotton Trade in India

0

200

400

600

800

1,000

1,200

80/81 85/86 90/91 95/96 00/01 05/06

Thousand tons of Lint

Source: ICAC

Exports

Imports

Cotton Yields

0

200

400

600

800

80/81 85/86 90/91 95/96 00/01 05/06

Kilograms of lint per hectare

World

SSA

Source: ICAC

India

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Implications of the Emergence of

India as a Major Exporter• Lowered Cotlook A Index:

- Cheapest growth among medium grades(contamination)

- Low shipping costs to China

• Closed important market for African exports (except ELS)

• Became No.1 competitor for SSA cottons in Asia:

- Hand-picked

- Roller ginned

- Shipping differential (1-2 cts/lb)

- Upward quality trend

International Cotton AdvisoryCommittee