Organization and Performance of Cotton Sectors in Africa ... - infoDev

cotton production was introduced in the United States in 1990, when 330 tonswere produced. Following a peak of 7,425 tons in 1995, the United States nowproduces less than 2,000 tons. Currently, the world’s two major organic cottonproducers are India and Turkey, which together account for two-thirds ofglobal organic cotton production. In 2004, this production was 25,400 tons,only about 0.1 percent of world cotton production.THE DEMAND SIDE: CHANGING FOCUS OF DEMANDAND COMPETITION WITH SYNTHETIC FIBERSBetween 1960 and 2005, global cotton demand grew at the same rate as the population(close to 2 percent per year), implying that per capita cotton consumptionhas remained steady at about 3.5 kgs per year. By contrast, consumption ofchemical fibers, which compete with cotton, has increased over the past 50 yearsby 2.2 percent per year, causing cotton’s share in total fiber consumption todecline from 60 percent in 1960 to less than 40 percent in 2005.Cotton lint consumption is determined by the location of the textile industries.During the 1960s, Europe, the United States, and Japan were major textile manufacturersand hence major consumers of cotton lint. Gradually, however, textileindustries moved to Asia. Today, China, India, Pakistan, and Turkey account formore than 70 percent of global cotton consumption. Key reasons for the relocationof textile industries to these countries include low wage and energy costs andtheir ability to deliver final goods in a timely fashion. Currently, the 10 largest cottonimporters account for more than 70 percent of global cotton trade. Threemajor producers—China, Pakistan, and Turkey—also import cotton lint to supplytheir textile industries. The four East Asian textile producers—Indonesia, theRepublic of Korea, Taiwan, and Thailand—accounted for more than 20 percentof world cotton imports in 2005, compared with just 3 percent in 1960. Finally,the shift of cotton consumption to Asia has been aided by the fact that mostchemicals are produced in Asia and by the abolition of the Multi-Fiber Agreement,which, in effect, dictated the trade flows of textile products.DECLINING AND VOLATILE WORLD PRICES FOR LINTReal cotton prices have declined over the last two centuries, although with temporaryspikes. The reasons for the long-term decline are similar to those characterizingmost primary commodities: on the supply side, reduced productioncosts resulting from technological improvements, and on the demand side,stagnant per capita consumption and competition from synthetic products(for some commodities, including cotton). Between 1960–64 and 1999–2003,real cotton prices fell 55 percent, remarkably similar to the 50 percent declinein the broad agriculture price index of 28 commodities (figure 2.1). Two periodsof pronounced price changes during the past half century were the oil-induced14 BAFFES AND ESTUR