WORLD TRADE  
ORGANIZATION  WT/CFMC/30 
7 December 2010 
 
 (10-6591) 
  
  
 
DIRECTOR-GENERAL'S CONSULTATIVE FRAMEWORK 
MECHANISM ON COTTON 
 
Domestic Cotton Sector and Other Reforms
 
 
Communication from the International Cotton Advisory Committee  (ICAC)  
  
 
 
 
    The following communication, dated 2 December 2010, is being circulated at the request of 
the Secretariat of the International Cotton Adviso ry Committee (ICAC) in partnership with the C4 
proponents under item 4 "Domestic Cotton Sector and Other Reforms" on the agenda of the Director-
General's Consultative Fram ework Mechanism on Cotton. 
 
_______________ 
  
EVOLUTION OF DOMESTIC COTTON SECTOR REFORMS  
IN THE C4 COUNTRIES 
 
Information Provided by the ICAC Secretariat
1 
 1. Cotton production in Benin, Burkina Faso, Chad and Mali rose from 101,000 tons of lint in 
1980/81 to a record of 759,000 tons in 2004/05 but fell to 333,000 tons in 2009/10. C4 production is estimated at 408,000 tons in 2010/11. Exports followe d the same trend, rising from 97,000 tons to 
nearly 750,000 between 1980/81 and the mid-2000's, and then dropping in recent years. Exports in 
2010/11 are estimated at about 400,000 tons. Textile mill use of cotton in the four countries is 
stagnant below 15,000 tons. 
2. Despite the increased recognition gained by  the C4 countries in the WTO and other 
international fora, their share in the world cotto n market shrank during the second half of the 2000s. 
From 2004/05 to 2009/10, harvested area fell by 48%, yields declined by 15%, and production 
dropped by 56% (compared to -16%, -4% and -19%, resp ectively, at the global level). As a result, the 
C4 share of world cotton production fell from 2.8% to  1.5%, and their share in world exports from 8% 
to 5%. 
                                                     
 
1 The ICAC Secretariat has prepared this paper. The views expressed are those of the ICAC Secretariat 
alone, and responsibility for any errors or omissi ons lies entirely with th e ICAC Secretariat.  This document has been prepa red under the Secretariat's own 
responsibility and without prejudice to the positions of Members and to their rights and obligations under the WTO WT/CFMC/30 
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  3. Cotton was historically considered to be the engine of rural development in the C4 countries 
in the arid and semi-arid regions
2 in which it was grown. In such areas, cotton was often the only cash 
crop that could be grown because of the prevaili ng agronomic conditions. Furthermore, as a desert 
crop, cotton could be relied upon to provide an econom ic yield even in years of drought or untimely 
rainfall when grain crops could fail, thus providing a measure of security to small holders who could 
use cash from cotton to purchase food. 
4. The cotton sector was vertically integrated, with a national cotton company promoting 
production, providing agricultural advice and inputs to growers, purchasing all seed cotton at fixed 
and guaranteed prices each season, transporting and ginning the seed cotton, and marketing lint and 
seed. All cotton producers belonged to farmer orga nizations at the village level. The farmer 
organizations were responsible for input distri bution to individual farmers and for seed cotton 
collection in villages. Their umbrella organizatio ns at the regional and national levels played a 
significant role in policy forma tion within the cotton sectors. 
I. STRUCTURAL ADJUSTMENT PROGRAMS 
5. The C4 countries reorganized their cotton sectors and adopted policies to encourage 
privatization within the framework of IMF/World Bank Structural Adjustment Programs beginning in 
the mid-1990s. Farmer organizations  were strengthened to be more  actively involved in critical 
decisions affecting the sector . Reforms transferred supply ch ain management functions from 
governments to cotton companies and producer groups. 
6. However, despite the reorganizations, compe tition in the procurement of seed cotton from 
farmers was not introduced at the ginnery level, and the basic principles of pan-territorial and pan-
seasonal pricing were maintained. A guaranteed pr ocurement price for seed cotton is announced in 
each country prior to planting based on the expect ed world cotton price. The guaranteed price is 
applied across the entire country (pan-territori al) for the whole season (pan-seasonal). A top-up 
payment ("ristourne") is paid at the end of each marketing season if the actual average market price is higher than the procurement price. In Burkina F aso, the pricing mechanism is linked to a smoothing 
fund to mitigate the impacts of year-to-year world market price fluctuations on producer prices. 
A price support fund owned by producers plays the same role in Mali. 
II. EXCHANGE RATES 
7. Exchange rates have had major impacts on co tton production trends in the C4 countries 
during the last 2 decades. Cotton production was boosted by the 50%-devaluation of the common currency, the CFA franc, against the French franc in January 1994. Conversely, cotton production fell 
sharply during 2005 throu gh 2009, as low international prices were  aggravated by the depreciation of 
the US dollar against the euro. 
8. The CFA franc is pegged to the euro at a fixed exchange rate (1 euro = 6.55957 FCFA), and 
the exchange rate dropped from 750 FCFA to the dol lar in early 2002 to about 450 FCFA in 2008. As 
a result, the season-average (August-July) world price (the Cotlook A Index) in domestic currency fell 
from a peak of 1,064 CFA/kilogram of lint CFR (cargo and freight) in 1994/95 (a fter devaluation) to a 
low of 595 CFA/kilogram in 2004/05. The 4-year average between 2005/06 and 2008/09 was 669 CFA/kilogram. 
 
                                                     
 
2 Semi-arid regions are usually defined as regions receiving from 700 mm to 900 mm of rainfall per 
year, but the pattern of rains is unpredictable. Arid regions receive less than 700 mm of rainfall per year.  WT/CFMC/30 
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  III. SCISSORS EFFECT 
9. The estimated average cost of produc tion in 2001/02 in the C4 countries of 
800 CFA/kilogram CFR Far East was equivalent to  50 cents per pound (1 US$ = 725 CFA). However, 
all things being equal, the same cost of productio n in 2009/10 was equivalent to 76 cents per pound, 
up 52% (1 US$ = 475 CFA). In 2001/02, a typical producer price of 200 CFA/kilogram was 
equivalent to 27.5 US cents/kilogram of seed co tton (= 200/725). In 2009/10, a producer price of 
160 CFA/kilogram (down 20%) was equivalent to 33.5 US cents/kilogram (= 160/475), up 22%. Accordingly, the adverse movement in world cotton pr ices, exacerbated by changes in exchange rates, 
resulted in a "scissors effect" of rising costs and falling revenue to the cotton companies that resulted 
in accumulated losses. During the past five years, the pricing system provided some protection to 
farmers, while ginning companies accumulated huge losses and were in most cases bailed out by 
governments. 
IV. FALLING YIELDS 
10. During the 2000s, the C4 countries were forced to reduce producer prices while input costs 
were rising. Therefore, harvested area dropped from 1.8 million hectares in 2004/05 to 0.9 million 
hectares in 2009/10. An unintended perverse effe ct of joint liability within producer associations 
contributed to the decline in yields and production: frustrated by having to pay for the inputs used by farmers who could not break even, many high-y ielding farmers abandoned cotton cultivation. 
11. Yields in the C4 averaged about 400 kilogram s of lint per hectare from the early 1990s to 
2005/06. However, the C4 yield has since dropped, and the average in 2009/10 sunk to 363 kilogram/hectare. As a result, the gap between the average yield in the C4 countries and the world 
average has increased. The C4 yiel d represented three-fourths of the world average in the early 1990s 
but now equals just half of the world average. Cu rrent yields are well below the potential of existing 
varieties with current production practices, estimated  to be 850 kilogram of lint per hectare, or 
two tons of seed cotton per hectare with an average ginning outturn of 42%. 
A. B
ENIN  
12. Reforms entailed mainly the privatization of i nput supply, the introduction of private ginners 
and the creation of inter-professional bodies to take over management of the sector through a highly 
regulated system precluding competition among gi nners. Under the reforms, the inter-profession 
bodies allocate seed cotton to each ginner in proportion to their ginning capacity, while prices of seed 
cotton remain fixed and uniform throughout the country. 
13. The privatization of ginneries started in the mid-1990s when cotton prices were high. The 
installed ginning capacity reached 600,000 tons of seed cotton (about 250,000 tons of lint). However, 
production hovered around 150,000 tons of lint in the late 1990s and early 2000s and dropped from 
171,000 tons in 2004/05 to 68,000 tons in 2009/10. The complexity of the regulatory mechanisms to distribute inputs to farmers and collect seed cott on according to allocations made them difficult to 
enforce. Payments for seed cotton have become irre gular, resulting in a steep drop in production.  
14. With the privatization of the main cotton company, SONAPRA, finally completed at the end 
of 2008, the sector has moved towards a concentr ated type, dominated by one private operator 
controlling all ginneries except one, input supply, trans it, and a significant share of the cotton seed oil 
and the textile industry. WT/CFMC/30 
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  15. Prior to the reforms, SONAPRA held a monopol y on the purchase of seed cotton, the sale of 
lint and the delivery of cotton inputs to farmers on credit. Within the framework of the structural 
adjustment program, the government of Benin d ecided to withdraw from cotton production in 1991 
and liberalize the sector. Most of the refo rms were implemented between 1993 and 2000: 
(a) The input supply function was progressively transferred to the private sector, and 
SONAPRA withdrew from this activity in 2000. 
(b) Eight private ginners were licensed between 1995 and 1998 (resulting in ginning 
overcapacity), and were allocated quotas of seed cotton by SONAPRA until 2000. 
(c) The monopoly of SONAPRA on seed cotton marketing was abolished in 2000. 
(d) National professional associations  of ginners and input im porters/distributors were 
created. 
(e) Inter-professional bodies were created to manage the sector: 
(i) an inter-professional association (AIC), was put in charge of managing the 
critical functions of the supply chain operation and coordinating the various 
professional segments; 
(ii) a clearinghouse (CSPR) was created for securing repayments of all input 
credits. 
16. The reform policy was updated in 2001, with the objective of developing a private but 
nationally integrated cotton supply chain, and tran sferring its management from the government to the 
inter-professional body.  
17. The ICAC Secretariat observes that the refo rms have not resulted in improved industry 
performance, improved efficiency, increased productio n or reduced operating costs within the ginning 
and transportation sectors. 
B. B
URKINA FASO 
18. Prior to reform in 2004, the sect or operated under a single-channel system, with a parastatal 
company, SOFITEX, retaining a monopoly on collec tion, processing, and marketing of seed cotton, 
lint and seeds. In many regions, SOFITEX was the so le provider of inputs and extension services. In 
2004 the sector abandoned its single-channel sy stem and moved to a local monopoly system. 
Two new private cotton companies were granted exclusive geographic zones, and SOFITEX withdrew from those two zones. Responsibility for coordination of the sector passed to an Inter-
professional Association comprised of the national farmer and ginner associations. 
19. The cotton sector reforms were aimed at strengthening producers' organizations and 
liberalizing the sector while maintaining the benefits of an integrated sector. 
(a) SOFITEX started the creation of new village cotton producers' associations (GPCs) in 
1996 to replace the former village groups  that had become insolvent in 1992.  
(b) Unions of GPCs at the district and provinci al levels were put in place in 1997, and the 
National Union of Cotton Producers of Burkina (UNPCB), representing all local 
producers' unions at the national level, was created in 1998.   WT/CFMC/30 
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  (c) The government sold 30% of SOFITEX's  capital in 1998 to UNPCB on credit 
(thereby reducing its shareholding to 35% ), and transferred responsibility for the 
cotton sector co-ordination/management to  the stakeholders through an Inter-
professional Agreement between UNPCB and SOFITEX and the creation of a cotton sector management committee. 
(d) The final step of the liberalization was th e sale of some assets of SOFITEX by the 
government to private investors, selected through a competitive bidding process. The 
new companies, FASO COTON and SO COMA, began opera tions in 2004 under 
eight year contracts which afforded them exclusive purchase rights in the Central and 
Eastern sections of Burkina's cotton production belt, respectively. SOFITEX 
withdrew from these zones accounting for 20% of national cotton output. UNPCB 
owns 10% of the shares in FASO COTO N and 20% of the shares in SOCOMA. 
(e) In 2006, an industry association grouping the 3 cotton companies (APROCOB) was 
created, and joined UNPCB in the Inter-p rofessional Cotton Association of Burkina 
(AICB), which replaced the former management committee. 
20. Production in Burkina Faso rose from 51,000 tons of lint to a record of 300,000 tons in 
2005/06. However, world market conditions led to a sh arp reduction in the producer price in the years 
following, and production fell to  150,000 tons in 2007/08. This resulted in losses for the cotton 
companies, and the government  had to recapitalize SOFITEX. 
21. Burkina Faso has officially approved the comme rcial use of biotech cotton. Bt varieties 
(varieties resistant to bollworms) were plante d on 80% of the total area in 2010/11. Burkina 
production is estimated at nearly 200,000 tons of lint in 2010/11.  
22. The ICAC Secretariat observes that industry refo rms have been more successful in Burkina 
Faso than in other countries, although there is no empi rical evidence that private ownership of gins is 
resulting in improved efficiencies of operation. The greater success of the privatization effort in 
Burkina Faso owes to a combination of good gove rnance and the unique geographic situation in 
Burkina Faso with three distinct production zones th at leads naturally to a trisected system of input 
supply and seed cotton procurement. 
C. C
HAD 
23. Liberalization of the cotton sector, promoted by The World Bank since 1999, did not move 
very far. 
24. The cotton sector of Chad is handicapped by very  high inland transportation costs to the port 
of Douala in Cameroon. Due to low prices, productio n collapsed from a record of 103,000 tons of lint 
in 1997/98 to 14,000 tons in 2009/10, the lowest in more than 50 years. Production in 2010/11 is estimated at 24,000 tons. 
25. Studies to privatize the national parastatal company, Cotontchad, that buys and exports all the 
cotton produced in Chad (75% owned by the government) were carried out, but the government and 
producers did not approve the proposals. 
26. However, the single oil mill in Chad, which was part of Cotontchad, was sold to a private 
investor in 2002. The operator had no experience a nd no expertise in the sector, and the oil mill did 
not operate during recent seasons. 
 WT/CFMC/30 
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  D. M
ALI 
27. Reforms have been implemented since 1998/99 to address the disastrous financial situation of 
the national cotton company, CMDT, and to prepare for the planned privatization. The reforms have 
been focused on several objectives: 
(a) Capacity building for village-level and regional farmer organizations. 
(b) Restructuring of CMDT and refocusing its activities on cotton operations. 
(c) Revising the producer price mechanism and creating a price support fund belonging 
to producers. 
(d) Creating an Inter-professional Body (IPC) and a Central Classing Office (OCC). 
(e) Recapitalizing CMDT and dividing it in to 4 fully privately owned regional 
subsidiaries (West, Center, North-East and South). 
28. An attempt to privatize the Western area of  CMDT failed in 2003 because the only bid was 
considered too low. 
29. The subsidiary of CMDT for cottonseed pro cessing, Huicoma, was sold to the government. 
After one unsuccessful round of bids, the company was sold in 2005 to a local group of investors. The 
investors had no experience in the cottonseed indus try, and Huicoma has acc umulated considerable 
debts owed to CMDT (which Huicoma disputes) a nd the oil mills in Koutia la and Koulikoro have 
stopped operating.  
30. CMDT has undertaken to sell 61% of the cap ital of each subsidiary through competitive 
bidding. Six potential investors were vetted and appr oved in 2010, and the six are expected to submit 
their bids for one or several of th e regional subsidiaries shortly. Bids for the four subsidiaries could be 
accepted in the first half of 2011. Each private company will have a regional monopoly to buy, gin 
and sell cotton in their exclusive area. The Governme nt of Mali will retain a 17% stake in the capital 
of the companies, while producer associations will own 20%, and employees 2%. 
31. Production in Mali rose from about 100,000 tons of lint in the early 1990s to a record of 
260,000 tons in 2003/04, but then dropped to 85, 000 tons in 2008/09. CMDT accumulated huge 
losses, and the government had to recapitalize the company. Production rose to 99,000 tons in 
2009/10 and is estimated at 109,000 tons in 2010/11. 
32. It is too early to evaluate the success of the privatization effort in Mali. 
__________