DIRECTOR-GENERAL'S CONSULTATIVE FRAMEWORK
MECHANISM ON COTTON

Communication from Burkina Faso

The following communication, dated 29 June 2015, is being circulated at the request of the delegation of Burkina Faso.[1]

 

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1  OVERVIEW OF THE COTTON SECTOR IN Burkina Faso

1.1  GENERAL INFORMATION ON THE COTTON SECTOR IN BURKINA FASO

1.1.  The cotton sector in Burkina Faso was liberalized in 2004, and its activities are split into three zones under the responsibility of SOFITEX, SOCOMA, and Faso Coton respectively. The map below shows the division into three zones of Burkina Faso's cotton growing basin.

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_ DISTRIBUTION OF COTTON ZONES

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_ Provincial boundary

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_ Eastern Zone

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_ Central Zone

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_ SOFITEX Zone

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_ Ginneries

______Source: SP-SFCL

 

1.2.  In Burkina Faso, cotton is a rain-fed crop. The main characteristics of the sector are the following:

·        around 350,000 cotton farms;

·        376,000 cotton producers;

·        9,000 Cotton Producer Groups (GPCs);

·        average total surface area per farm of 8.5 hectares;

·        average cotton production area per farm of 3 hectares;

·        small scale producers, not very literate, with an extremely low level of mechanization.

1.3.  The distribution of crop rotations on farms is as follows:

Source> SP-SFCL

 

1.4.  In economic terms, it is worth noting that:

·        Cotton's contribution to the GDP is around 10%. For a long time, exports of fibre were the main source of foreign exchange for Burkina Faso's economy and regularly contributed to more than 60% of foreign currency earnings.

·        However, the massive increase in gold mining in the past decade has seen cotton's average contribution to foreign exchange earnings fall to around 35%.

2  organization and structure of the sector

2.1.  __

_ Permanent Secretariat for Monitoring the Liberalized Cotton Sector (SP/SFCL)

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_ State

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_ Family of cotton companies

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_ Family of producers

The different stakeholders in the sector are the State of Burkina Faso, the cotton producers and companies, and the Cotton Industry Association. The chart below shows how the sector is organized.

 

Source: SP-SFCL

 

2.1  The State

2.2.  The chief role of the State within the cotton sector is:

·        to guarantee the regulatory, legislative and fiscal framework;

·        to determine agricultural policies;

·        to regulate and ensure the smooth functioning of the sector;

·        to develop infrastructure.

2.2  The producers and their organizations

2.3.  Since 1996, producers have belonged to associations called "Cotton Producer Groups" (GPCs). The main activities of these groups are:

·        distribution of inputs;

·        management of short- and medium-term loans;

·        marketing of seed cotton;

·        other related activities such as managing members' contributions and social welfare.

2.4.  Today, there are almost 9,000 GPCs throughout the country's cotton growing area. In 1998 they joined together to form cotton producers' unions, under the umbrella of the National Union of Cotton Producers of Burkina Faso (UNPCB).

2.3  The cotton companies

2.5.  Cotton companies are responsible for the following:

·        supplying producers with inputs;

·        giving producers advice;

·        buying, collecting and transporting seed cotton;

·        ginning seed cotton;

·        providing value added for finished products (fibre) and associated products (cotton seed, fibre waste).

2.6.  The cotton companies are grouped together in the Professional Association of Cotton Companies (APROCOB).

2.4  Interprofessional Cotton Association of Burkina Faso

2.7.  The Interprofessional Cotton Association of Burkina Faso (AICB) is a non-profit association bringing together APROCOB and the UNPCB. It is responsible for:

·        the price-setting mechanism for seed cotton and the selling price of inputs;

·        approving cotton research programmes and budget;

·        managing the Smoothing Fund and the Inputs Fund;

·        creating a consultation framework to deal with issues of common interest to members;

·        managing the cotton chain through coordination among the different branches of the sector.

2.5  The strategic partners

2.8.  These consist essentially of cotton research and the banks.

2.5.1  Cotton research

2.9.  Conducted by the National Institute for the Environment and Agricultural Research (INERA), it plays a vital role in the production system and is in part responsible for the current dynamism of cotton production. It works upstream in the following areas:

a.      improvement of varieties;

b.     agronomy, cultivation methods and natural resource management;

c.      agricultural socio-economics;

d.     integrated crop protection and support.

2.5.2  The banks

2.10.  Local and foreign banks operate on several levels, chiefly:

a.      financing crop season and input credits;

b.     making short-, medium- and long-term loans to producers;

c.      financing investment by cotton companies and other participants in the chain.

3  data on cotton production

3.1.  Following the record production of 713,000 tonnes in 2005/2006 thanks to the measures adopted and implemented under the sector revival plan, production fell back to 360,000 tonnes in 2007/2008, and 451,000 tonnes in 2008/2009, owing to adverse climatic conditions and depressed world cotton prices.

3.2.  In 2009/2010, production fell to 361,997 tonnes, and in 2010/2011 to 335,398 tonnes, before rising again to 417,383 tonnes in 2011/2012 and 650,000 tonnes in the 2013/2014 crop year.

3.3.  During the 2014/2015 season, production rose to 708,500 tonnes, 8% higher than the 2013/2014 season. In 2015/2016, production is expected to reach 778,181 tonnes of seed cotton.

3.4.  The graph below shows the performance of Burkina Faso's cotton sector as described above.

Development of the acreage and production of seed cotton as well as the yield in the field for the past ten seasons

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_ Average seed cotton yield per hectare (kg/ha)

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_ Seed cotton production (T)

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_ Sown areas (ha)

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Source: AICB

 

3.5.  Yields of seed cotton in the field have improved, rising from an average of 700 kg/ha in the early 1990s to around a tonne at present (1,073 kg/ha in 2014/2015 as opposed to 1,007 kg/ha in 2013/2014 and 1,006 kg/ha in 2012/2013).

3.6.  In recent years, however, yields have continued to hover at just over a tonne, giving the impression that a ceiling has been reached in this respect.

Production and yield data for 2009/2010 to 2015/2016

Season	Area (hectares)	Seed cotton (tonnes)	Average yield (kg/ha)	Fibre (tonnes)
2009/2010	417,335	361,997	862	150,365
2010/2011	373,139	335,398	898	140,867
2011/2012	429,380	417,383	972	173,556
2012/2013	626,279	630,000	1,006	264,000
2013/2014	645,372	650,105	1,007	270,084
2014/2015	660,592	708,500	1,073	295,532
2015/2016 (forecast)	738,181	778,181	1,054	326,000

Source: AICB

 

4  data on the quality of the fibre

4.1.  The quality of cotton in Burkina Faso has always been a matter of great concern for the stakeholders in the sector, since it is a key factor in the world cotton market. Consequently, Burkina Faso acquired a cotton fibre classification laboratory which has always enabled the sector to produce very high quality cotton, recognized throughout the world.

4.2.  The laboratory used to classify cotton fibre from the three cotton companies is accredited by COFRAC in accordance with standard NF ISO/CEI 17025.

4.3.  This accreditation was maintained in accordance with No. 1-5133 Rev. 1 of 29 November 2014 following the first monitoring assessment.

4.4.  The table below lists the types of fibre produced in Burkina Faso.

Usual sales of Burkina Faso cotton in terms of classification or grade (colour, trash content and preparation)

Standard	Grade	White grades	Grade	Tinged grades
Top grades	BOBY / Super	White cotton, lustrous, few impurities, good preparation	BOLA / Super	Creamy colour, less trace, few impurities, good preparation
	BOBY	White cotton, less lustrous, presence of some leaves, good or average preparation	BOLA	Creamy colour, less lustrous, presence of some leaves, good or average preparation
Medium grades	TOMA	White cotton, slightly dull, presence of leaves, average preparation	RUDY	Creamy colour, some spots, presence of leaves, average preparation
	VOTA	Cotton, dull white to slightly grey, considerably more leaves than TOMA, average preparation	VIVA	Creamier colour, more leaves than RUDY, spotted, average preparation
Lowest grades	BUFA	Greyish or variegated cotton, more leaves than VOTA, with preparation	BABU	More coloured and dull than VIVA, more leaves, with preparation
	BOBO / 3	Dull variegated cotton with many leaves, with preparation	BOBO / 4	Strongly yellow tinted cotton, high trash content, with preparation

Source: AICB

 

5  sector management tools

5.1.  The tools for managing the sector are chiefly the Interprofessional Agreement, the price setting mechanism referred to as the "Smoothing Mechanism", and the Cotton Inputs Fund.

5.1  The Interprofessional Agreement (AIP)

5.2.  This is a collective agreement between the producers represented by the UNPCB and the cotton companies represented by APROCOB.

5.3.  The purpose of the Agreement is to determine the practical arrangements for sector management missions that are entrusted to the AICB under the memorandum of understanding setting out the terms and conditions applicable to operators in the sector. This memorndum, signed by the State and the cotton sector operators (cotton companies and producers) defines the State's commitments with respect to the sector, whose management has been handed over entirely to the operators, as well as the obligations of the cotton companies and producers in connection with the operation of the sector.

5.4.  In particular, the AIP defines the method for determining the purchase price of seed cotton and the selling price of inputs, and the management procedures for other common functions (cotton research, seed multiplication and distribution, training and advice for producers, quality control of seed cotton, fibre classification, slope maintenance in production areas, gathering of economic, agronomic and statistical information, guidance and general monitoring of the sector).

5.5.  Annexed to the AIP as an integral part thereof are documents relating to the regulation of the Smoothing Fund and of the Cotton Inputs Fund. The second revision of the AIP was signed in April 2012.

5.2  The cotton price-smoothing mechanism for producers

5.6.  Adopted by the AICB in March 2006, the objective of the cotton price-smoothing mechanism for producers is to minimize cotton price fluctuations and high price volatility from one year to the next, thereby securing producers' earnings. It is structured around the following elements:

a.      determination of a floor price (set between March and April); this floor price takes account of market signals, as it is indexed to world cotton price trends and US$/€ exchange rate projections;

b.     coverage of the price risk thanks to a smoothing fund that guarantees the floor price against fluctuations in international cotton prices.

NB:

·        The fund is added to when prices are higher than the fixed trend price and drawn from when prices are below the floor price.

·        Smoothing Fund technical regulations and resources are managed and closely monitored by the Bank of Africa (BOA), which was selected following a call for tenders.

·        The mechanism provides for the determination and payment of a complementary price or rebate, which is fixed after the fibre has been for sale on the international market for 14 months (from January of year n to March of year n+1).

·        The rebate is paid when sales prices are higher than the price of the average trend indicated by the mechanism and after the mechanism has used a part of the surplus to replenish the Smoothing Fund.

·        After the Smoothing Fund has been replenished, which is a priority, the remaining amount is distributed to producers (60%) and the three cotton companies (40%).

·        Where the level of production is higher than or equal to 500,000 tonnes of seed cotton, the distribution figures change to 62% for producers and 38% for the cotton companies.

·        The Smoothing Fund Association (AFdL) established by the AICB is responsible for monitoring and managing the mechanism.

5.3  The Cotton Inputs Fund of Burkina Faso

5.7.  The cotton Inputs Fund is a mechanism whose chief objectives are:

a.      to reduce the cost of agricultural inputs (improvement of producers' income);

b.     to reduce the inputs burden for cotton companies, thereby improving their cash flow and enabling them to pay producers for cotton seed more rapidly.

5.8.  With an initial endowment of CFAF 10 billion obtained through the State and the TFPs, the fund is monitored and managed by the Cotton Inputs Fund Association of Burkina (AFICB) set up by the AICB.

5.9.  The technical regulations and resources of the Inputs Fund are managed by a commercial bank, (ECOBANK Burkina), which was selected following a call for tenders. The fund became operational in September 2013.

6  Constraints facing the cotton sector

6.1.  The chief constraints facing Burkina Faso's cotton sector are the following:

·        the repeated cotton crises that threaten the survival of the cotton sector;

·        the fluctuation of the euro/dollar exchange rate that sometimes affects the sector's gains in competitiveness;

·        the stagnation of yields at around 1,000 kg per hectare for years;

·        the vulnerability of the production system to uncertainties and climate change;

·        the continuing decline in soil fertility;

·        the continuing rise in world input prices, which undermine the levels of yields, production and, in particular, earnings of producers in Burkina Faso;

·        the ever increasing share of synthetic fibres in global textile consumption.

7  outlook

7.1.  For the survival and prosperity of the cotton sector in Africa, and in Burkina Faso in particular:

·        countervailing measures must be introduced urgently to prevent stagnation, bearing in mind world price fluctuations and the size of deficits accumulated over the years;

·        market consolidation is essential in order to reach price levels that allow cotton of African origin to balance the books;

·        field productivity must be increased through improved exploitation and adaptation of transgenic cotton;

·        programmes must be developed to improve agricultural yields and water and soil conservation (stone barriers, compost pits, sowing under the cover of plants, cultivation techniques, etc.);

·        the possibility of an insurance mechanism suited to the increasingly uncertain climatic situation should be considered;

·        production should be processed locally to protect it from the negative effects of the international market.

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