The African cotton sector has to overcome significant hurdles to successfully compete against the major suppliers on the world market. Africa has immense potential, only the smallest part of which has so far been tapped. The Bremen Cotton Report talked to Africa specialist Gerald Estur about the chances for African cotton. The Frenchman is currently working as a consultant for the cotton industry and was active, among other things, as a long-time statistician for the International Cotton Advisory Committee (ICAC), Washington, and Managing Director of the trading company Compagnie Cotonniere COPACO S.A. in Paris.
Bremen Cotton Report: What are the characteristics of the African cotton market based on the situation in different regions such as North, South, East and West Africa?
Gerald Estur: 60 percent of the African population is employed in agriculture. The sector generates around 25 percent of global GDP. Cotton plays an important role in the economic development of the continent. It is cultivated in around 35 of 54 countries. It has a central role when it comes to the fight against poverty. Finally, the natural fibre is a cash crop, or a valuable product which provides income and employment. The work of countless small farmers who produce small production quantities with their families on small areas is prevalent. The work is arduous. Income sits on the poverty line. Sowing and harvesting is done by hand. Ox-drawn ploughs are used for tillage at best.
What is the situation with yields?
Depending on the availability of seed, fertiliser and pesticides or sufficient irrigation, yields differ in the various regions. Rain fed irrigation is dominant. In North African countries such as Egypt, Ethiopia and Sudan, there is additional artificial irrigation. Therefore, the yields are higher with values of about 600 Kg/ha compared to 400 kg/ha in West Africa or 250 kg/ha in southern and eastern Africa. Nevertheless, overall they are far below the current world average yields of 745 kg/ha. The acreages vary depending on the prices paid by the trading companies. In some countries they are set before the start of sowing, in others not until the end of the season. Thus, depending on the world price development, the economic risks are borne by either the producer or the marketing company. Often, marketing companies make purchase contracts for the crop in which they provide seed and inputs, for example, on the basis of credit which is then offset again by buying the crop.
What are the largest African producer countries?
According to available estimates, as can be seen in the current annual report of the Bremen Cotton Exchange, African countries will produce about 1.56 million tonnes in the 2015/16 season, and therefore about 7 percent of the cotton produced in the world. West African countries such as Burkina Faso, followed by Mali, Ivory Coast, Benin and Cameroon are among the largest producers. 85 percent of Africa’s cotton is exported. In the 2015/16 season, the total exports of all African countries are likely to be about 1.3 million tonnes. That would be 17.8 percent of world exports. The French zone is the largest African exporter, with 1.02 million tonnes and a 13.7 per cent share of world trade. The rest is made up by the countries of eastern, northern and southern Africa. China imports around half of Africa’s cotton. Bangladesh, Indonesia, Vietnam and Thailand are also important importing countries. Only about 1.5 percent of the cotton is processed domestically.
What are the weaknesses of African cotton production?
The African cotton economy’s weaknesses lie in inadequate access to inputs, suboptimal production practices, low intensity of research and development programmes and the fact that most of the African cotton is irrigated exclusively by rain. Whereas most of the cultivation in the rest of the world is carried out using artificial irrigation. Other important factors are decreasing soil fertility, unfavourable weather conditions, also caused by climate change, poor seed quality and a lack of improved cotton varieties.
What about the quality of African cotton?
Normally we would assume that harvesting by hand would be a decisive advantage over machine-picked cotton. Hand-picked cotton should be cleaner, because it contains fewer neps and has a lower short-staple ratio than machine-picked cotton. Here higher proportions of leaf and stem remains must be removed in the ginning process. But ginned African cotton is known for its increased proportion of foreign materials such as packaging residues and foreign fibres, which leads to price reductions when selling and may considerably interfere with downstream processes. African cotton prices also come under pressure from the way it is marketed and shipped. The quality of African cotton is mainly checked by hand classing. The lack of reliable and objective instrument test results has a negative impact on the achievable prices. In addition, it is assumed that the supply of African Upland cotton is less reliable and has longer delivery times than those of most competitors. It has a reputation for being less uniform and consistent in terms of its quality and the quality of its packaging.
What can be done to increase the productivity of African cotton production?
The potential of the African cotton sector is far from being exhausted. There are significant possibilities for improving productivity and quality with the development of smart irrigation methods. The use of preventive plant protection methods is important, with the measured and sensible use of pesticides against crop damage. Also, the use of BT seed safeguards economic risks and simultaneously reduces the use of pesticides. Likewise, partial mechanisation, given the scarcity of labour also in Africa, is likely to be an important measure in increasing the productivity of the cotton economy decisively.
How can the dependency of African cotton on exports and prices be reduced?
Basically, the key to success here lies in the development of a vertically integrated downstream production chain in textile and clothing. However, Africa has up to now only been of marginal importance in the processing of cotton. The local textile industry is usually not competitive, also because of the high level of imports of new and used clothing. Cotton consumption in Africa is expected to continue to stagnate at 378,000 tonnes in the current 2015/16 season. Egypt represents half the spinning mill consumption in Africa. Good approaches can be seen, for example in Ethiopia, where the construction of industrial zones and the promotion of foreign investment is being supported. Generally, development takes time. There is a lack of energy, transport routes and the qualification of workers. The intensity of the efforts is very different from country to country and depends on the respective system of government. Nevertheless, Africa has a bright future ahead. In Africa, there is often criticism that support programmes of the major cotton producing countries exert pressure on international prices, which negatively impacts the competitiveness of African countries.
Does this criticism still apply in this form today?
The current low prices are still due to a huge imbalance between the supply and demand of cotton resulting from high stock levels. A large amount of the stocks is stored in China, which is the consequence of a government regulation policy not in line with the market. Recent studies by the ICAC show that the proportion of direct support by governments in relation to the total production of cotton has fallen in the 2015/16 season compared to last year.
Thank you for the interview!