Wednesday, October 31, 2007

Cotton redux: finding a winner

One issue I forgot to bring up during the debate on cotton in West Africa: Who is going to profit the most from the estimated six to 14 percent increase in world cotton prices? Probably not West Africa.

That’s right. If U.S. farmers lose a good portion of their subsidies – and it looks like they will certainly lose something – don’t count on West Africans from picking up the slack from falling U.S. production. That’s because West African cotton has already expanded 10-fold in the past thirty years. However, the region has seen an actual decrease in its yield per hectare.

According to World Bank economist John Baffes, in the 1970/71 harvest, West and Central African cotton farmers produced 109,000 tons of cotton from 644,000 hectares (about 2.4 acres), giving them a yield of 169 kilograms/hectare.

In 1989, the Africans produced 498,000 tons from 1,101,000 hectares, producing a yield of 452. Other than the season of 1990/90, West Africans have not had a yield that large. But it still lagged beyond yields posted for the rest of the world. (In 88/89, the world scored 546.)

The West and Central Africans have doubled production since 88/89, but their yields have not topped 452, which they hit in 2004/05. (They’ve generally been better than 400 for most of this century, however.) Since 2000, world yields are much higher: from 598 to a whopping 744 in 04/05, followed up by 723 two seasons ago.

The question is why have African yields stagnated? It could be bleached soil with the decreasing efficacy of inputs. It also may be also a lack of GM, yes genetically modified crops. American officials always point out that 30 percent of world cotton stocks are now grown genetically. For most Africans, however, GM remains unpalatable.

There’s always the question of technology. The richer countries in the world are pushing aside those countries who can’t afford to keep up with yield-increasing technologies. Because Africa’s corrupt cotton sector is mostly broke – and beholden to their states for funds – they’ve not had a chance to invest in new technologies.

One country that has greatly modernized its cotton sector? Brazil. Yes, the country that took the U.S. and its subsidies to court has been moving and shaking up its cotton sector for a while. According to the trade publication, Cotton Farming, Brazil’s industry is a sleeping giant.

In 2003, members of the U.S. trade delegation took a tour through Brazil and this is what they had to say about its cotton industry: “Brazil has many pluses ­ excellent weather, sufficient rainfall, good soil composition and access to the world's best-performing varieties. What it doesn't have are efficient infrastructure, stable currency, sufficient ginning capacity and government support programs.”

(Notice the lack of government support programs as a negative.)

In 2002, Brazil produced roughly 847,000 tons of cotton on 735,000 hectares, a yield of 1,150. However, the Brazilians told the U.S. trade delegates they were planning on making use of another 150 million to 200 million acres for cotton. That’s about the same amount of space the U.S. uses for its entire cotton crop.

Brazil is now importing cotton for its own mills, which are mostly described as being very modern. It needs to fix its transportation infrastructure, the U.S. team said. But other than that, the sky is the limit.

"The take-away message for U.S. producers is that we need to keep our eyes on Brazil. If the world price ever gets up in the 70 or 80-cent range, this country has unlimited potential. It could become a juggernaut if it really wanted to move in that direction."

With the nail in the coffin for U.S. subsidies, prices may begin inching that way. It sure shows that the country really knew what it was doing when it took the U.S. to the WTO.

It also proves that more of some of the fight over subsidies was fought in the court of public opinion. Brazil was very careful not to highlights its modern industry, and at the same time point out how U.S. subsidies were harming African nations.

You can feel National Cotton Council’s chairman Woody Anderson’s frustration at being whipped by the richer nations of the developing world. “The developed versus developing country dichotomy advanced by some in Cancun was a clear attempt to move the Doha Round negotiations away from reciprocity,” he said in testimony at the House Agriculture committee in 2004. “Additionally, under the current structure of the WTO, which allows self-designation, Brazil claims the same economic position as Mali, and China claims the same exemptions as Nigeria.”

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