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July 27, 2008

African cotton farmers hope for WTO trade talks breakthrough

While besuited government officials slug it out at world trade talks in Geneva this week, African peasant farmers watching their cotton plants grow hope any deal will allow them to farm their way out of poverty.

Subsidies that encourage farmers to grow more cotton in rich countries like the United States are blamed for flooding the market and depressing world prices in recent years, making it harder for poor farmers in Africa to make ends meet.

"It is the growers at the bottom who suffer," said Seydou Ouedraogo, who grows cotton near Leo, some 200 km south of Burkina Faso's capital Ouagadougou. "We just want to be treated equally. It is our only source of income, and only cotton can lift us out of poverty. This is unfair competition," Ouedraogo said.

At this time of year, the cotton plants here are still small, standing 20-30 cm tall. Their broad green leaves standing out against the rich, dark earth which has soaked up the seasonal rains of the past couple of months.

Burkina Faso, West Africa's top cotton producer, is a leading member of the Cotton-4, or "C-4" group, which has pressed World Trade Organisation (WTO) negotiators to include extra restrictions on cotton subsidies in any final trade deal.

The group, which also includes Mali, Benin and Chad, has had some success. Negotiators in Geneva are discussing a draft that would cut U.S. cotton subsidies by 82.2 percent -- more than the 60 percent cut proposed for other similar farm subsidies.

Washington has paid out $2 billion to $4 billion a year in subsidies in recent years to the 25,000 U.S. cotton farmers who export 80 percent of their output and account for 40 percent of cotton traded internationally around the world.

The resulting oversupply has pushed down world cotton prices, in turn cutting the household income for millions of farmers across West Africa for whom cotton is the leading cash crop, used to pay school fees, healthcare and other necessities.

Farmers here mostly run smallholdings of just a few hectares, tending the fields with a combination of their own muscle power, help from family members and oxen. Even the few big plantations with tractors and other machinery are a far cry from the huge, heavily mechanised farms of the United States.

Subsidies to U.S. cotton farmers have become increasingly contentious in recent years. Apart from the C-4 campaign, Brazil has successfully challenged the U.S. subsidies at the WTO and said this week it will seek $4 billion in trade sanctions.

"We are hoping these negotiations will eliminate subsidies completely and immediately," said Seydou Coulibaly, who grows around 7 tonnes of cotton a year on his 6-hectare farm in Ouelebougou, southern Mali.

Coulibaly should be a prime beneficiary of the current "Development Round" of WTO talks, launched in Doha in 2001.

But a successful conclusion to the crunch talks in Geneva is far from certain. And even if a deal is struck, the effects may not be immediate, or enough to transform the lives of an estimated 10 million West Africans who depend on cotton.

Some economists have estimated the U.S. subsidies depressed world cotton prices by up to 15 percent in recent years.

But since hitting a 2007 low of just under 46 U.S. cents per lb in May that year, U.S. cotton futures market prices almost doubled to more than 90 cents/lb in March this year, helped in part by falling U.S. output which Washington says has dropped by 38.5 percent in the past two years.

Prices have eased back since March, and futures closed in New York on Tuesday at 68.76 cents/lb.

African cotton farmers say that despite the price rise, which is passed on to farmers in most West African countries through a centrally-fixed producer price that takes account of ginning and transport costs, they struggle to make ends meet.

"For cotton to be profitable today, we need a producer price of 250 CFA francs ($0.60) per kg. For years it was around 160 CFA, but this year the government has set it at 200 CFA/kg," said Coulibaly in Mali.

He said the price of fertiliser -- a major cost for farmers growing cotton, which bleeds the soil of vital nutrients -- had doubled in the past year, partially offsetting the better price.

"An increase in the price of cotton will improve farmers' standard of living, but price is only one aspect of development," said Mohamed Lamine Ndiaye, an African programme manager for British aid group Oxfam in Senegal.

"We need to develop added value ... Only 3 percent of West African cotton is processed here. We need to develop a strong cotton industry, but to do that we need to have a good (price) environment," he said.

Reuters

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