The Importance of Cotton in Africa

Africas Cotton in the World

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 ICAC & Grald Estur 250 ginneries in rural areas Seminar on Cotton in Africa 6-8 September 2007, Arusha Oil crushing mills & textile mills

Cotton in Africa
N W S E

Overview of the Cotton Sector in 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)

Producing countries Production < 2,000 tons 2,000 to 40,000 tons > 40,000 tons 0 3,000 Km

> 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
Thousand tons
2,000 1,750 1,500 1,250 1,000 750 500 250 0 80/81 85/86 90/91
Source: ICAC

COTTON EXPORTS
Million tons 10 8

Afric a Franc Zone

World

6 4 2 0
95/96 00/01 05/06

USA

Africa

80/81

85/86

90/91
Source: ICAC

95/96

00/01

05/06

COTTON EXPORTS
2006/07
Greece 3% Brazil 3% Australia 6% Other 12% USA 34%

World Exports
Million tons
4

1
India 12%

0
Uzbekistan 12% Africa 18%

USA
Source: ICAC

India

Uzbek.

CFA Zone

Brazil

Australia

05/06

06/07, est.

07/08, for.

AFRICAN COTTON EXPORTS

2006/2007
0 Burkina Faso Mali Benin Zimbabwe Cameroon Egypt Tanzania Cte d'Ivoire Chad Zambia Other
Source: ICAC

EXPORTS: CFA ZONE

500

100

200

300

400

1,200 800 400 0 80/81 85/86 90/91 95/96 00/01 05/06 10/11

EXPORTS: EAST & SOUTH AFRICA

1,200 800 400 0 80/81 85/86 90/91 95/96 00/01 05/06 10/11

World Imports
Million tons
10 China (M) 8 6 4 2 0 91/92 95/96 99/00 03/04 07/08, proj. Rest of the World

COTTON IMPORTS
2006/07

Is African Cotton Competitive?

Constraints

Other 9% Other Asia 13% Russia 4% Mexico 4% Thailand 5% EU 6% Turkey 11% China 29%

Productivity Costs of production Quality

Source: ICAC

Indonesia

Bangladesh 7% 6% Pakistan 6%

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
100 85

Cotlook A Index
Season-average (US cents/lb)

77

70 55 40 25 73/74
average 73/74 97/98 = 74 cents/lb

68 59

average 98/99 06/07 = 56 cents/lb

81/82

89/90

97/98

05/06

Causes of Long Run Price Decline:

50

Biotech Cotton
% of World Cotton Area

Technology Change (50%) Polyester (25%) Retail Prices of Apparel Government Measures

40 30 20 10 0 4 7 12 16 17 21 22 29 25

36

40

97/98

99/00

01/02

03/04

05/06

07/08, proj.

World Cotton Yield

Kg of lint/ha
800 700
647 751 756

Cotton Yields
Kilograms/Ha
800

World: Avg. Increase 13 kg/yr

600

600

Africa: Avg. Increase 1 kg/yr

500 400 82/83 87/88 92/93 97/98 02/03 07/08, for.
200 80/81 85/86 90/91 95/96 00/01 05/06 400

Cotton picking in the U.S . in the early 20th century

Cotton picking in Africa today

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

Cotton picking in the U.S. today

Nominal Exchange Rates

Domestic Currency vs USD (April 2002 = 100)
150
MZM TZS UGX XOF ZMK

Cotlook A Index
US cents/lb CFA/Kg

100 80 60 40 20
O ct -0 2 O ct -0 3 O ct -0 4 O ct -0 5 Ap r-0 3 Ap r-0 4 Ap r-0 5 Ap r-0 6 O ct -0 6

1,200 1,000 800 600 $ CFA 88/89 96/97 04/05 400 200 0

100

50

Ap r-0 2

0 80/81

Source: IMF

CFA Cotton Prices

CFA/kg Lint US cents/lb

Cotlook A Index
Shillings/Kg

1,200 800 400 0 80/81 88/89 96/97 04/05

Producer Price A Index

100 80 60 40 20 0 80/81 88/89

$ Tanzania Shillings

2,000 1,600 1,200 800 400 0

96/97

04/05

Cotton Market Shift in India

Million Tons

Cotton in India
Production

2001/02: 2nd largest importer: 500,000 tons

4

Mill Use

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

2 95/96 00/01 05/06

Source: ICAC

Cotton Trade in India

Thousand tons of Lint
1,200 1,000 800 600 400 200 0 80/81 85/86 90/91
Source: ICAC

Cotton Yields
Kilograms of lint per hectare
800

Exports World
600

India Imports
400

SSA

200 0
95/96 00/01 05/06

80/81

85/86

90/91

95/96

00/01

05/06

Source: ICAC

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 Advisory Committee