Report compiled for the 2006 Paris International Agricultural Fair
All you need to know about cotton
Consequences
In the event of a crisis, individual capital-intensive farms (for instance in Brazil and Australia) are at greater risk than less intensive family farms, since the former are in direct contact with global market prices and the latter only indirectly so. Conversely, in countries with mostly non-intensive family farms, such as those in Africa, cotton crises are a direct threat to the survival of cotton firms, and without the help of aid agencies, those firms could have gone under several times in the past twenty years.
However, not all family firms have the same capacity to cope with global market price falls.
In countries such as China, where farming families generally have substantial non-agricultural income, farmers may decide to store their cotton for longer in the hope of a future rise, or decide to grow less. This is not the case in Africa, where the crises have led to changes in the way in which the prices paid to farmers are set. Farmers have been left with the impression that cotton is no longer a guarantee of a stable income or constantly rising prices.
Cotton commodity chains were for a long time an attractive opportunity for agricultural product (fertilizer and pesticide) suppliers and banks. The financial fragility of cotton firms in the face of cotton crises has tended to have an adverse effect on the supply conditions for such goods and services.
In an attempt to compensate for the drop in income from cotton, several countries have introduced support measures. Several times, Turkey has granted producers a price bonus. The United States has launched measures that are triggered once the global market rate falls below a certain threshold. These practices clearly show that it is sometimes global price falls that give rise to subsidies, rather than the opposite.