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December 30, 2010

Malian cotton struggles against international subsidies

by Ruudhan Mac Cormaici

Cotton has been in Broulaye Traoré’s family long enough for him to remember the days when they used to call it “white gold.”

In the decades after Malian independence in 1960, surging global demand pushed yields higher and great swathes of land here in the Sikasso region, in the southwest of Mali, turned white as smallholders switched to the fluffy cash crop. When Traoré took over as head of his extended family in the early 1990s, he remembers business running smoothly.

“In 1994, there weren’t many problems with cotton,” he says, sitting in the shade of a tree in the village of Kolondieba, in the heart of Mali’s southern cotton belt. “It was straightforward: the government bought it from us and there was little trouble. The problems began a few years later, starting with problems getting paid.”

It’s the middle of the cotton harvest in Sikasso. Men and women can be seen in the fields from first light, leaning over the stalks, filling their baskets. Donkeys haul carts brimming with newly picked bulbs to the villages, where they’re collected by open-topped lorries that trundle for hours along dirt roads to deliver the stocks to the towns further north, where the raw product is packed for export.

Mali’s reliance on cotton is hard to overstate. In a country that ranks 178th out of 182 in the UN’s human development index, about 40 per cent of rural households, or 2.5 million people, depend on cotton for their livelihood. The crop accounts for one-third of cultivated land and provides the second largest source of foreign exchange earnings. But here and across the Cotton-4 – or C-4, as the west Africa producer countries of Benin, Burkina Faso, Chad and Mali are collectively known – the industry is besieged by problems and the halcyon days of the late 20th century are retreating into memory.

Although Mali and its neighbours produce cotton more cheaply than anywhere else – a competitive advantage that logically should place the C-4 in a strong position to benefit from the world’s increasing appetite for cotton products – global processes outside their control have been constraining their potential.

A rise in cotton prices on world markets in 2007 and 2008 largely passed West African farmers by, because the dollar was weak against the CFA franc, which is pegged to the euro.

Then there is the long-term trend towards lower global prices, further dampened by a fall in demand for clothes when the recession took hold, which helps explain why production in the 12 main African cotton producers fell by 23.7 per cent between 2008 and 2009.

“The financial crisis hit Mali really hard,” says Rachel Hearson, business development manager for cotton at the Fairtrade Foundation. “Like other West African nations who rely on cotton for export revenue, they saw a dramatic reduction in orders for their cotton as the global demand for clothes dropped dramatically in the immediate aftermath of the collapse of western banks.”

Most of Mali’s cotton is exported to China, whose garment factories are the world’s biggest consumers but whose reduced output during the downturn has had a clear knock-on effect. In the same 12 African countries, production fell by 50 per cent between 2005 and 2009.

“The global crisis of 2008 led to big difficulties for us as well,” says Sidy Nguiro, of the pioneering Malian Organic Movement (Mobiom), a co-operative that includes 8,000 cotton producers.

“The market was badly hit, and it meant that 30-40 per cent of our production was unsold and just sat at the port in Dakar. The CMDT [state monopoly] couldn’t sell it.”

In Sikasso, falling prices led many smallholders simply to abandon cotton and replace it with food commodities such as maize or rice. Broulaye Traoré explains that in 1997 he had eight hectares of cotton, but the following year he halved it to four and kept it that way until last year, when prices stabilised and he planted more cotton seeds. Nearly everyone in his village – where cotton is grown by 95 per cent of farmers – did the same.

In a country where the typical cotton holding is two or three hectares, Traoré is a big producer, but his income from the land has to cover the needs of a large extended family. “My father is dead, so I’m the head of a family of 55 people now,” he says. “I have two wives and six children. I’m responsible for everything – health, food and all the necessities. It’s a lot of people.”

Traoré hopes to sell 18 tonnes of cotton this year, which – after loans have been repaid and equipment costs covered – will leave him with the equivalent of just over €2,300, or €44 a week, to meet the needs of 55 people over the coming year. “I really hope so,” he says of the target. The typical annual return on three hectares of cotton – the national average – would be less than €400.

The vulnerability of Malian producers to sudden price shifts on global markets casts uncertainty over every harvest. “People don’t know how much they’re going to get,” says Abdoulaye Soumara, an advocacy officer with Oxfam in Bamako. “They know how much they’ve produced but they have no idea about the international markets.”

A weak dollar and falling global demand have clearly shaken Mali’s cotton industry, but many believe the greatest impediment it faces is the policy of mostly rich-world governments of heavily subsidising their own cotton-growers.

The Great Cotton Stitch-Up, a report published last month by the Fairtrade Foundation, shows that in the past nine years, $47 billion has been given by the United States, the European Union, China and India to their cotton growers. Over 51 per cent of that has gone to US farmers, the world’s biggest cotton exporters. The effect of this “wall of subsidies” has been to dampen prices, “fatally undermining the C-4’s ability to trade their way out of poverty”, the report states.

“For the Cotton-4, it is a situation that spells economic ruination. With no subsidies to bail them out, Cotton-4 farmers struggle against insuperable odds to compete. And a lack of revenue means C-4 governments cannot afford to build roads, ports and other infrastructure to catalyse a garment industry that would employ millions of people and create greater value in a desperately underdeveloped sector.”

While no data exist to measure the distorting impact of subsidies at a national level, the World Bank says they reduce prices by 12.9 per cent, amounting to an annual revenue loss to African producers of $147 million.

In his office in a smart complex of municipal buildings in Kolondieba, Yacouba Koné, the state’s agriculture director for the region, says Mali’s problem is fundamentally that of the global market. “Our cotton, if you take the quality, is very competitive with other countries’, but with the subsidies . . . there’s a huge loss for Mali,” he says.

Koné is encouraged by recent news that cotton prices are again on the rise, but the effect will be limited, he says, unless Malian growers can play on a “level playing field” with their counterparts in the north. “Smallholders here are very much aware of the problem, but whose door do they knock on?”

Mali: in numbers

12,710,000: population

73.8%: adult illiteracy rate

48.1 years: life expectancy at birth

46.9 per cent: enrolment in education

77.1 per cent: population living on less than $2 a day

Source: United Nations Development Programme

Irish Times

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