Despite the political crisis affecting the country, Mali expects to produce 500,000 tonnes of unginned cotton in the 2012/13 season, below the previous target of 600,000 MT but still well above last season. In 2011/12 Mali, Middle Africa’s largest cotton grower, increased production by more than two thirds to 445,000 MT, buoyed by a 38% increase in the reference price paid to farmers of XOF255/kg, XOF18bn of subsidies for fertilizer and improved relations between the government and farmers cooperatives. According to the Compagnie Malienne pour le Développement des Textiles (CMDT), the public-private body charged with overseeing Mali’s cotton sector, all farmers cooperatives were paid for the 2011/12 crop before the start of the current season after CMDT contracted an XOF115bn syndicated loan. Notwithstanding the potential disruption that could be caused by the country’s political crisis in the north, the outlook for the current season is positive given that the main cotton-growing region is in the south, far from the current troubles. CMDT has finished the distribution of inputs to cooperatives and the area harvested for cotton has increased from an estimated 477,000 ha in 2011/12 to nearly 547,000 ha in 2012/13. Additionally, the weather in growing regions has been favourable since late May, helping development of the crop. This should help Mali maintain top spot in SSA’s cotton producing rankings, narrowly ahead of Burkina Faso.
Zimbabwe’s cotton production to exceed expectations in 2012/13
Despite a prolonged dispute between farmers and the government over the reference price which delayed the start of the cotton marketing season, Zimbabwe’s cotton output has outpaced expectations and is now expected to reach 316,000 MT in 2012, up from an earlier government estimate of 286,000 MT, thanks to improved weather. Earlier this year farmers held back cotton from sale in protest at the price offered by ginners of 30 US cents/kg, arguing that the price did not take into account the high cost of fertilizer and other inputs. The standoff was finally resolved when the government intervened, more than doubling the minimum price to 77 US cents/kg, although it remains unclear whether ginners will be prepared (or even able) to pay this price to farmers, especially given that international prices have lost around two thirds of their value since April 2011, severely squeezing ginners’ margins. Prior to liberalization in 1994 Zimbabwe’s cotton sector was one of the country’s success stories, generating around US$150m in annual export revenues. But since then the sector has declined sharply owing to the uneven transition from a system of small-scale production to large-scale farms, as well as farmers’ poor access to financing, and the latest dispute has done little to revive confidence in the sector. Nonetheless exports of refined cotton are rising and could reach 120,000 MT in 2012/13, cementing the country’s position as SSA’s third largest cotton exporter.
Togo to boost cotton production by 20% in 2012/13
One of West Africa’s smaller producers, Togo, is planning to increase production of unginned cotton by 20.3% in 2012/13, to 100,000 MT. According to the Société Nouvelle de Coton du Togo (SNCT) which oversees the sector in the country, higher prices fixed during the 2012/13 season that started in May have encouraged farmers to return to cotton after declining world prices had pushed many of them out of the sector last year. The price for high-grade cotton was fixed at XOF230/kg by the government, 6.9% higher than last season, with low-grade cotton getting XOF215/kg. The planted area has also increased from around 100,000 ha in 2011/12 to 110,000 ha this season. Assuming normal weather patterns the SNCT is realistic in its plan to increase output to 150,000 MT by 2017, although its exports of refined cotton remain small by regional standards, at just 33,000 MT in 2011/12 according to the International Cotton Advisory Committee (ICAC).
Cotton price outlook
World cotton prices rose moderately in August, with the Cotlook A index closing the month 3.9% higher to 86.5 US cents/lb. Nonetheless, they remain 10.6% lower than at
the start of 2012 and have lost two thirds of their value since April 2011, reflecting ample global supply and flat demand. The outlook for prices is unclear owing to conflicting trends. On the one hand the ICAC has forecast a 7% fall in world production to 25.2m MT this season, which should support prices, as will the expected continuation of the Chinese government’s cotton buying programme to increase strategic stocks. But on the other hand global stocks rose to a record 16m MT at end-July, indicating ample supply. With increasing signs of a global surplus for the 2012/13 season, international cotton prices will come under pressure in the coming months and are likely to fall back towards their ten-year average of 77 US cents/lb.