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Strengths and weaknesses of cotton farms in Brazil, the United States and Mali

19.04.2006
Three years ago, Benin, Burkina Faso, Mali and Chad submitted a negotiating proposal to the World Trade organization (WTO).

In particular, the proposal, entilted "Poverty Reduction: Sectorial Initiative in Favour of Cotton", called for a ban on the massive subsidies the United States, Europe and China grant their cotton producers. To gain a clearer understanding of the issues surrounding subsidies, a team from CIRAD decided to analyse the strengths and weaknesses of the American, Brazilian and Malian production systems. To this end, the researchers looked at four of the criteria that determine competitiveness: cost prices, paid labour costs, land costs and input prices. The study showed that any differences primarily depended on cropping practices and the degree of access to inputs and services at the beginning of the production chain, and on product marketing conditions.

In Brazil, the technico-economic performance of cotton-growing systems is founded on their high yields. Conversely, in Mali, it is the low costs per hectare that ensure performance. In terms of cost price per pound of cotton fibre, Brazilian cotton varies between 50 and 60 cents/lb, while the average cost price in Mali is around 40 cents/lb. In the United States, on the other hand, the national average is more than 80 cents/lb.

Brazil’s performance is also governed by its low relative costs in terms of paid labour, equipment and land (just 1.5% of the total cost, compared to more than 20% in the United States and 12% in Mali) . The United States, for its part, is saved by its input (seed, fertilizer and phytosanitary product) costs: they account for just 25% of the total cost, compared to 33% in Mali and almost 60% in Brazil, where it is phytosanitary products, followed by fertilizers, that swell the production bill.

In terms of operating costs, the United States is far from the most efficient. American farmers in fact owe their survival to State subsidies. Mali, for its part, seems to be in an intermediate situation, with the lowest unit costs and positive margins, albeit still small in relation to the area cultivated, due to its very low yields per hectare. However, this observation leaves considerable hope of improvement, unlike in the other two countries, where yields are already very high, particularly in Brazil, and seem to have reached a peak.

In Brazil, the "cotton photograph" produced in 2004 revealed the greater economic efficiency of the large, intensive farms in Mato Grosso. However, this raises the issue of the sustainability of those systems, whose profitability remains unpredictable, with much greater economic risks than in Mali, where most of the crop is produced using family labour, which can be a way of adapting to constraints. In Brazil, the deciding factors are economic: in the event of lower productivity due to the weather, or to phytosanitary factors, the only way of adjusting is to disinvest or let farms go bankrupt. In the United States, the State support policy has enabled US producers to top the world export rankings, while Brazil and Mali are just third and sixth respectively.

These considerations look like a "mirror effect" as regards the Malian and Brazilian situations, particularly in the Nordeste region of Brazil: operating margins are extremely small in an economic system that is much less closely supervised than in Mali, where the upstream operator (the Compagnie malienne de développement du textile, CMDT) covers some of the costs, particularly seed cotton transport from farm to mill, processing and storage. In short, this observation raises the question of the role of public support policies and traditional products, which are indeed fragile but are also socially important in terms of the redistribution of the wealth generated by the cotton economy.

Patricio Mendez del Villar | alfa
Further information:
http://www.cirad.fr/en/actualite/communique.php?id=432

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