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

national monopoly (state-owned or private) is generally in a better position toprotect its selling price.Affiliated ginners are generally more aware of market demand and have lessexposure to international price fluctuations than independent ginners becausea part of the market risk is taken by the mother company, which has the abilityto hedge price and exchange rate risks.VALORIZATION OF BY-PRODUCTS: MARKETS FORCOTTONSEED OIL AND CAKEThe ginning process separates the cotton lint from the seeds. In all of the studycountries, ginning companies buy the raw cotton and own both the lint and theseed. In all countries but Zimbabwe, ginners treat a small proportion (typicallyless than 10 percent) of the seeds and pack them for distribution back to farmersas planting seed. Ginners sell the remainder 27 for processing into oil and cakeor, in a few cases, the seeds are processed directly by the ginning company. 28The value of lint obtained from a ton of seed cotton is three to four times thecombined value of the oil and cake that are derived from processing the seeds.For this reason, oil and cake markets are often neglected in the analysis ofAfrican cotton sectors. Yet in some of the study countries, the revenue from seedsales more than covers the cost of ginning. In Cameroon, SODECOTON has sofar avoided the losses that have affected the sector in other WCA countries, inpart because of cross-subsidization from its profitable, integrated oil business.In Tanzania, more than a third of cotton ginners now have an integrated oil processingbusiness. Not surprisingly, some ginners see oil processing as their core(and most profitable) business.International Trade in Cottonseed OilIt is estimated that about 5 million tons of cottonseed oil is produced worldwideper year. This amount is similar to the production of groundnut, coconut, andpalm kernel oil, but well behind palm oil (38 million tons), soybean oil (37million tons), rapeseed oil (18 million tons), and sunflower oil (11 milliontons). Moreover, while a large proportion of the four leading oils is tradedinternationally, less than 10 percent of global cottonseed oil production is traded.World cottonseed oil prices averaged $1,600/ton during 2007/08, up from$800/ton during 2006/07 (October to September) These price increases aresimilar to those of other edible oils. For example, the World Bank’s fats and oilsprice index increased 51 percent from 2006 to 2007 and 44 percent from 2007to 2008. Cottonseed oil used to be traded with a large premium over the fourleading oils. However, the premium has almost disappeared lately because ofthe high biodiesel demand for rapeseed oil, which has also put upward pressureon soybean and palm oil prices. 2926 BAFFES AND ESTUR