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Cotton production expected to decline 3% in 2009/10

20
Oct '09
The African Franc Zone1 (AFZ) is the source of a significant percentage of world cotton trade. The region has become a major competitor with the United States in international trade in recent years. The AFZ is a bloc of countries defined by a common monetary medium of exchange that is based on the former French Franc.

Today however, the common currency in the region is tied to the Euro. A shared historical legacy among all the member countries is that they are former colonies of France. Not surprisingly, cotton in the African Franc Zone was introduced by the French. Cotton production in the region has suffered some setbacks in recent timesdue to a range of factors.

The share of AFZ's production in world output peaked at 5 percent in 2002/03. In the 2008/09 marketing year, the region accounted for 2.2 percent of world cotton output. Between 1965/66 and 1999/2000, Mali consistently outpaced Burkina in the share of annual production.

Benin also overtook Mali to become the second largest producer in the region. Production in Burkina Faso, Benin, and Mali in 2009/10 is forecast at 875,000 bales, 425,000 bales and 325,000 bales, respectively. In Burkina and Benin, that will be a 3-percent and 5-percent increase in output from the previous year, while in Mali, it is a 7-percent decline in production from a year ago. According to a 2007 GAIN Report (SG7011), Burkina has an estimated 350,000 cotton farms with a population of farm workers close to twice the number of farms. Seed cotton per producer is approximately 2 tons with farm size averaging around 2 hectares.

Production in the AFZ reached an all-time high in 2004/05, when total output was 4.9 million bales. The years that followed, however, have seen a precipitous decline in production. In 2009/10 cotton production in the AFZ is expected to decline 3 percent from the previous year, to 2.3 million bales.

Producer prices for cotton in the region, as in the rest of the world, have been declining. With the exception of 2007/8, world prices have relatively low in the five years since 2003/04. In addition, the Euro—to which CFA franc is pegged in de facto terms—has been strengthening relative to the U.S dollar in recent years.

As a result, cotton farmers have seen their margins and incentives erode rapidly with rising input prices. In addition, country-specific government support programs to farmers have often come late in the cotton growing season, causing uncertainty in the allocation of acreage and other resources to production. In the last two years, the decline in cotton area and yield has been compounded by rising food prices, forcing farmers to divert fertilizers and other inputs to cereal production.

The cotton sector in several of the AFZ countries continues to go through reforms. Mali's attempts to privatize its parastatal cotton company, Compagnie Malienne pour le Developpement des Fibres Textiles (CMDT) has been beset by numerous problems as the public enterprise faces financial constraints that have undermined its ability to procure inputs and meet debt obligations. In Benin, the approval of Societe Nationale Pour la Promotion Agricole (SONAPRA) for privatization was reversed by the government. Further, in the last quarter of 2008, the government of Benin transferred SONAPRA gins to a new parastatal, la Société de Développement du Cotton (SODECO).


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