What future for the cotton of Burkina Faso ?

Can Burkina’s cotton growers hope to benefit from predicted higher world market prices?

The situation of cotton producers in Burkina Faso is nearly desperate. Every year the price of cotton is down-scaled. In 2004 the price of one kg of seed cotton was 210 CFA francs (as compared to the 700 francs or more paid to a European producer for cotton of lower quality). The following year the price fell to 175 francs (the threshold price) and then to 165 francs in 2006. As can be seen, the way the price was calculated was altered in 2006. The threshold – a guaranteed minimum price – had disappeared. Or, at least, it had taken on a different significance! The threshold price can now vary from year to year! And again,  2007 brings a further reduction: 145 francs. It is the continuous downhill slide of the dollar versus the Euro that is the – main – culprit of the plummeting cotton prices paid to Burkina, as the CFA franc is linked to the Euro.

Nevertheless, in spite of this situation, few peasants have stopped growing cotton. Many have reduced their cotton planted acreage, but it still remains quite substantial, since growers continue to have hopes that the situation will improve. Or rather, they no longer know to which cash crop they could switch!

Are cotton growers right in refusing to despair? It is yet too early to say. An article in the International Herald Tribune on September 11  predicts the likelihood of a strong increase in the price of cotton fibre … for December 2008! One author, Mr Jansen, forecasts a possible increase of up to 1 dollar per pound of cotton by December 2008! This is three times as much as in December 2001 and much higher than announced for December 2007 (about 60 cents). This could appear to be good news for African cotton farmers.

But we should not rejoice too quickly. Many uncertainties remain.

• Will cotton growers not have been definitely discouraged, when due to start sowing in May or June 2008? With the Euro now standing at 1.42 dollar, the cotton trade of countries with a currency linked to the Euro risk extinction.  A price of 60.5 cents/pound of cotton fibre is equivalent to roughly 600 francs/kg, which is far below the production cost in Burkina. Will cotton trading companies still be around in 2008?

• Nothing is less certain! In fact in 2006, when the companies adopted a different price calculation scheme, the Chairman of SOFITEX, the main cotton company of Burkina Faso, announced wide and large that the “adjustment fund” (fonds de lissage) would rescue the cotton trade. The fund was to compensate for the sharp edges of world market jolts and guarantee a minimum price for the coming season. Moreover, there was even to be a bonus for growers, if the cotton sold well. Europe had undertaken to help the trading companies set up such a fund.

I consulted the official SOFITEX web-site for more details on the said adjustment fund. The search engine produced the following result:

Your search on “fonds de lissage”:
0 hits on 948 pages listed

For a fund that is supposed to be the life buoy for the cotton trade, this is a bit thin! I continued my search on the web and eventually came upon an article by Louis Goreux, written for the AICB (Association Interprofessionnelle du Coton du Burkina) a joint organisation for people across the entire cotton sector. The article is fairly technical but is a good explanation of how the fund is supposed to operate. But not one word on the size of the fund. Inquiries with the President of the West African Cotton Growers’ Association, AproCa, and the Director General of the Trade Ministry, revealed that the fund is – empty. How could it then save the cotton sector? A mystery. The only thing that remains certain: Europe, once again, has not kept its promise.

• If the dollar continues to fall, it is quite possible that even if cotton is paid 1 dollar/pound, it does not necessarily follow that the price of cotton fibre would be more than 700 francs/kg. All depends on the exchange rate of the Euro versus the dollar.

• Finally, cotton producers who persevere into 2008 will have to be on the alert. It is not so sure that the bonus money, promised to producers if the cotton sales go well in December 2008 and to be paid out in April or May 2009, will not by then have disappeared into the adjustment fund, which neither the Europeans, nor the trading companies have so far been able to feed!

In conclusion, one additional piece of information. The WTO web site has the following message from 2004: ”All results of July 2004 indicate that cotton will be dealt with in an “ambitious, quick and specific way” in the talks on agriculture. Three years later, in an information note, n° 69 of October 1st 2007 from IDEAS Centre in Geneva, we simply learn that “The deadlock on cotton looks certain”.

All is not rosy for Burkina Faso’s “white gold”. 

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