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

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Figure 2.2 Nominal Cotton Prices (US$ per kilogram) and Agricultural PriceIndex (October 2001 = 1.0), January 1985–September 20083.02.5index2.01.51.00.5Jan-85Jan-87Jan-89Jan-91Jan-93Jan-95cottonJan-97Jan-99agricultureJan-01Jan-03Jan-05Jan-07Source: World Bank, Commodity Price Data.commodities have responded to increased energy costs much more stronglythan cotton. 14EXTERNAL FACTORS AFFECTING WORLD LINT PRICESTwo major factors affecting African cotton trade—but for the most part notunder full control of individual governments—must be underscored: (a) theimpact of exchange rate variations, that is, the relative value of the nationalcurrency with respect to the dollar; and (b) the distortions created on theworld market for cotton lint by the subsidies paid by some of the Organisationfor Economic Co-operation and Development countries and by China to theircotton producers.Exchange RatesBecause cotton is traded in U.S. dollars (as are most commodities), cottonprices are affected by the movement of the U.S. dollar in addition to allother factors affecting cotton prices. For example, the U.S. dollar’s strengthafter the East Asian financial crisis was partly responsible for the collapse ofcommodity prices in the late 1990s and early 2000s. Similarly, the weaknessof the U.S. dollar contributed to the commodity price boom at the middleof the 2000s. 15 However, all cotton producers are affected by the variabilityof the currency in which their cotton is sold. Countries examined in thisreport are affected by three exchange rate–related issues: (a) appreciation of16 BAFFES AND ESTUR
the CFA franc, particularly critical for WCA countries; (b) the Dutch diseaseeffect in Zambia; and (c) hyperinflation in Zimbabwe.The CFA franc, the currency of 14 WCA countries, is linked to the euro(or to the French franc before 2000; see box 2.1 for the history of the CFAfranc). Following the 1994 devaluation of the CFA franc against the Frenchfranc, WCA countries in general, and their cotton sectors in particular,gained competitiveness; production in the four WCA study countries nearlydoubled over the next four years (compared with a 20 percent rise over theprevious four years), driven especially by Burkina Faso and Mali. However,following the very strong appreciation in recent years of the euro against theU.S. dollar (and consequently of the CFA franc), the competitive edge that itBox 2.1 The CFA Franc and Cotton in WCAThe CFA franc (CFAF) is the common currency of 14 WCA countries comprisingtwo groups, all members of the African franc zone. One groupincludes Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal,and Togo, which form the West African Economic and Monetary Union(WAEMU) and whose common central bank is the Central Bank of WestAfrican States. The other group includes Cameroon, the Central AfricanRepublic, Republic of Congo, Gabon, Equatorial Guinea, and Chad, whichform the Central Africa Economic and Monetary Community (CEMAC) andwhose common central bank is the Bank of Central African States (BEAC).The CFAF was created in 1945, when France ratified the Bretton Woodsagreement. At that time, the CFAF was the abbreviation for Franc of theFrench Colonies of Africa (Franc des Colonies Françaises d’Afrique). In 1958,it became Franc of the French Community of Africa (Franc de la CommunautéFrançaise d’Afrique). Today it means Franc of the African FinancialCommunity (Franc de la Communauté Financiére d’Afrique) for WAEMUmembers and Franc of Financial Cooperation in Central Africa (Franc de laCoopération Financiére en Afrique Centrale) for CEMAC members. Initially,convertibility with the French franc (FF) was set at 0.59 CFAF/FF, becoming0.50 CFAF/FF after the 1948 devaluation of the French franc. In 1958, twozeros were added to the existing denomination, making it 50 CFAF/FF.During the early 1990s, it became increasingly apparent that the CFAF wasovervalued. The degree of overvaluation, however, differed markedly amongWCA countries. Baffes, Elbadawi, and O’Connell (1999), for example, basedon a single-equation framework, estimated that during the early 1990s, theCFAF was overvalued more than 30 percent in Côte d’Ivoire while it wasroughly in equilibrium in Burkina Faso. Devarajan (1999), based on a simplegeneral equilibrium model, concluded that the CFAF overvaluation in 1993(one year before the devaluation) was 78 percent in Cameroon, 52 percent in(continued)MARKET CONTEXT 17
Page 1: AGRICULTURE AND RURAL DEVELOPMENTOr
Page 4 and 5: AGRICULTURE AND RURAL DEVELOPMENTSe
Page 6 and 7: © 2009 The International Bank for
Page 8 and 9: Section II. Historical Background a
Page 11 and 12: BOXES, FIGURES, AND TABLESBoxes2.1
Page 13: 5.2 Summary of Pricing Mechanisms i
Page 16 and 17: eference are limited to neighboring
Page 19 and 20: ACKNOWLEDGMENTSThis study was carri
Page 21 and 22: ABBREVIATIONS¢ U.S. centACPAgricul
Page 23: US$U shWAEMUWCAWTOU.S. dollarUganda
Page 26 and 27: output markets, improving productiv
Page 28 and 29: etween these competing needs, provi
Page 30 and 31: ■■■■■competition increase
Page 32 and 33: monopolies range from 0.98 to 1.15,
Page 34 and 35: macroeconomics, developments in com
Page 36 and 37: central body and that the state nee
Page 39 and 40: CHAPTER ONEIntroductionDavid Tschir
Page 41 and 42: The debate about how to deal with t
Page 43 and 44: Figure 1.1 Map of Africa Highlighti
Page 45: hypotheses about sector performance
Page 48 and 49: to reach 25 million tons of lint in
Page 50 and 51: cotton production was introduced in
Page 54 and 55: Box 2.1 (Continued)Togo, 39 percent
Page 56 and 57: Box 2.2 Cotton SubsidiesCotton subs
Page 58 and 59: efers specifically to the presence
Page 60 and 61: picking, storage, handling, or tran
Page 62 and 63: national monopoly (state-owned or p
Page 65: SECTION TWOHistorical Background an
Page 68 and 69: shares belonging to governments, an
Page 70 and 71: Changes Made Since the End of the 1
Page 72 and 73: long-term development strategies, (
Page 74 and 75: possible link between price-setting
Page 76 and 77: production fell further, to lows of
Page 78 and 79: all aspects of the chain from input
Page 80 and 81: suggestions (a) of establishing fas
Page 82 and 83: Figure 4.1 Decision Tree for Cotton
Page 84 and 85: Figure 4.2 African Cotton Sector Ty
Page 86 and 87: Box 4.1 Is This Typology Specific t
Page 88 and 89: 52Table 4.1 Trading Off: Strengths
Page 90 and 91: CONCEPTUALIZATION OF THE LINKS BETW
Page 92 and 93: chosen in this book and the impact
Page 94 and 95: Table 4.3 Expected Performance alon
Page 96 and 97: Box 4.2 (Continued)Second, farmers
Page 99: SECTION THREEComparative Analysis:C
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PRICING MECHANISMS IN WCAPricing me
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efore planting, price risk in the s
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Table 5.3 Summary of Producer Share
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Finally, FOT price shares in WCA ro
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MALI AND CAMEROON: GOVERNMENT MONOP
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Significant in Mozambique, the comp
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Zimbabwe transitioned during the 19
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Box 6.1 (Continued)A move from a co
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82Table 6.1 Summary of Input Supply
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84Table 6.1 (Continued)IndicatorsCo
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CHAPTER SEVENQuality ControlGérald
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Tanzania Competitive 1 2 Very lax n
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Figure 7.1 Estimated Premium for To
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all fiber coming from Africa—are
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Box 7.1 (Continued)newly liberalize
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CHAPTER EIGHTValorization of SeedCo
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competitive market in some of the o
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a few years, it indicates that some
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should eventually make a difference
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CHAPTER NINECotton ResearchDuncan B
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With regard to human and financial
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■■■Be involved in setting res
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made royalty payments to CRI. When
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and to identify complementary inves
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CHAPTER TENYields and Returns toFar
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fact that 55 percent of cotton is p
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Yields by Farmer TypeTo assess perf
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Factors beyond company services als
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Table 10.1 Summary Crop Budgets by
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According to the focus group inform
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Figure 10.6 Net Margins after All C
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All other variables in the budgets
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Table 10.2Summary of Average Yield
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■■■■impression is given tha
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were based on a 2005 cotton farmer
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more recent data are not available
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Figure 11.1 Estimated Average Ginni
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to buy seed cotton immediately afte
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146Table 11.3 Overall Competitivene
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148Table 11.4 Total Value Added per
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Figure 11.3 Total Value Added per c
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CHAPTER TWELVEConclusionsPatrick La
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Table 12.1 Summary of Expected and
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Valorization ofby-productsValue of
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Macro impact■ Total value addedpe
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across concession zones, with newer
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high yields. However, a mixed pictu
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governance and regulatory structure
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against price and exchange rate ris
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Improvements in the Delivery of Ext
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esistant, “stacked” genes), and
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Just as improved sector management
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More-competitive systems are perhap
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■■■■Interprofessional commi
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were to occur, it would most likely
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APPENDIX AStatistical Tables181
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1989/90 43 111 383 40.7 95 0.491990
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1989/90 62 150 416 41.0 95 0.671990
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1989/90 43 89 482 41.3 95 0.651990/
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1989/90 99 189 521 42.8 85 0.541990
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1997/98 31 327 95 33 to 35 2,950 83
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1994/95 82 344 238 33 207.0 40.0119
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Table A8 ZambiaSeasonLint productio
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Table A9 ZimbabweSeasonLint product
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Table A10 Ginning and FOB-to-CIF Co
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1997/98 1.64 598 210 75 49 74 7.619
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1987/88 17,609 31,238 564 414 911 4
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206 NOTES11. Important cotton secto
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208 NOTES47. Benin is not included
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210 NOTES79. In Zimbabwe and Zambia
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BIBLIOGRAPHYBadiane, Ousmane, Dhane
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and Instability, ed. A. Sarris and
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World Bank. 2007. Strategies for Co
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CFA exchange rate, 17-18b, 19fcompa
Page 258 and 259:
input credit and extension in, 77-8
Page 260 and 261:
firm types, 211n93fixed prices, for
Page 262 and 263:
productivity, 119, 121f, 205n8,209n
Page 264 and 265:
key indicators, 56-58, 57-58t,155-5
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focus group discussions by farmerty
Page 268 and 269:
technology transfer, 170-71by typol
Page 270:
ECO-AUDITEnvironmental Benefits Sta
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