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Subsidies to cotton industry shot up in 2011-12
27
Sep '12
International Cotton Advisory Committee (ICAC) releases a report on Production and Trade Policies affecting the cotton industry. Subsidies to the cotton industry, including direct support to production, border protection, crop insurance subsidies, and minimum support price mechanisms are estimated at $4.8 billion in 2011/12 up from $1.4 billion in 2010/11.

Ten countries provided subsidies in 2011/12, and the subsidies averaged 17 cents per pound, up from 5 cents per pound on average in 2010/11. More countries have cotton production support programs, but because of high prices the programs did not result in actual spending in 2011/12.

Lower market prices for cotton in 2011/12 led to an increase in subsidies paid to producers. The Cotlook A Index averaged 100 cents per pound during 2011/12, and 164 cents per pound in 2010/11.

However, prices in 2011/12 were still well above long-term averages, and government interventions in a number of support programs in several countries were not triggered. Pakistan, Mexico and India have minimum support price programs, but because market prices were still higher in 2011/12, these programs did not result in payments to producers. However, if prices were lower these programs would be effective.

The share of world cotton production receiving direct government assistance, including direct payments and border protection, increased from an average of 55% between 1997/98 and 2007/08, to an estimated 84% in 2008/09.

During 2009/10 through 2011/12, the share averaged 49%. Since 1997/98, there is clearly a negative correlation between the Cotlook A Index and the amount of subsidy provided to the world cotton industry, as well as the number of subsidizing countries. Some countries provided subsidies for cotton inputs in 2011/12, especially for fertilizers, storage, transportation, classing services and other marketing costs.

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International Cotton Advisory Committee (ICAC)

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