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Negative spin

By Katrina Manson | Published:  07 July, 2009

Despite their many natural advantages, West Africa’s cotton growers are struggling to find a place in a complex world market.

Cotton is grown in 37 of Africa’s 53 states, and is a major source of foreign exchange earnings in more than 15. The World Bank even calls it “a rare economic success story in Sub-Saharan Africa”. ,While the continent’s share of the world’s agricultural trade fell by about half from 1980 to 2005, its share of world cotton exports more than doubled. For those countries that do rely on it, the World Bank also says it is “critical in the fight against poverty”.

In Tanzania more than 40 percent of the population is supported by cotton, and it employs more people than any other cash crop in the country. In South Africa, 90 percent of cotton grown is genetically modified and yields are high. Even in Zimbabwe, analysts say that cotton production still functions as an economic prospect. In total, East and Southern Africa produces 500,000 tonnes of cotton lint a year. North Africa, too, is a major producer – 36,000 tonnes is produced in Sudan, and 100,000 in Egypt. The latter has become a brand in itself, popular amongst the department store set.

However, much of the discourse around African cotton has in recent years focused on the so-called “Cotton-4” – Benin, Burkina Faso, Chad and Mali, where state-run enterprises dominate, and where questions as to the economic sustainability of African cotton amidst the current distortion to world markets, are most pointed.

In a global economic downturn that has sent trade down a third, few but the most bonus-laden of executives are fashion-minded about fripperies. Clothing spend is more closely tied to changes in income than, for example, food spend. Consumption of new garments is likely to fall, and most consumers will take far less than the usual average annual per capita cotton consumption of 3.5kg per year. Fewer people are buying clothes, and so fewer markets are buying cotton – 13 percent less cotton in fact, including a damaging 18 percent drop in consumption in China, the world’s largest producer and consumer of cotton.

Prices have tumbled down 60 percent since March 2008, and only 30 million hectares are forecasted to grow cotton this 2009/10 season, the lowest since 1950/51, with an expected 23.4m tons of lint, down from the 2006 record peak of 26m.

The long-term view is not looking too bright either: the fortunes of cotton and clothing are less inseparable than ever before. Cotton makes up only 37 percent of fibre consumption, down from 50 percent in 1986, and this year it might fall to a new low of 36.8 percent. Polyester, along with the recession, is beating cotton back.

Several other long-term trends point to a structural shift much more damaging than the short-term economic collapse. Prices are down 55 percent in real terms from the 1960s to the first part of this decade. The cash market index, still descried in northwest England, near the commercial and historic heart of cotton in Liverpool, Cotlook A, has fallen from an average 74¢/lb throughout the 1970s-1990s to an average 58¢/lb so far this century. Last year’s commodities boom took them as high as 73¢/lb, but it was a less stratospheric rise than for other commodities. Standard Chartered is forecasting a rise to 60¢/lb for Cotlook A in 2009 and 75c/lb for 2010, but not everyone is convinced.