Cotton subsidies top $1.3bn – despite record price

World cotton producers received $1.3bn in subsidies despite market prices doubling to a record high, with farmers in some countries enjoying a rise in state support.

Prices of cotton, as measured by the Cotlook A index, averaged 1.64 cents a pound in 2010-11, up from 0.78 cents a pound the season before.

With output rising too, the value of farmers’ cotton crops soared to more than $90bn, from $38bn the year before, data from the International Cotton Advisory Committee (ICAC) imply.

Nonetheless, the proportion of the world crop backed by direct support, crop insurance subsidies and export help edged higher, by 1 point to 53%.

Hidden extras

While the headline level of payments more than halved, from $3.2bn in 2009-10, the decline was nearly all accounted for by China, the top cotton producing country.

Indeed, China lost to the European Union top rank in the global subsidy league – even though the EU produces less than 1% of world cotton.

The figures also conceal the total level of support for cotton farmers, excluding payments not linked to direct support, crop insurance subsidies or export help.

They exclude, for instance, a 6.67-cents-a-pound handout to US farmers, based on historical rather than current area and yield, which totalled an estimated $588m, unchanged from 2009-10.

Controversial support

Cotton subsidies have proven amongst the most fiercely protected by many large producing countries, even while direct support for many other crops has waned.

The US has failed to reform its payments to cotton growers, a powerful political lobby, despite them having been declared illegal by the World Trade Organization. Washington has preferred to pay-off Brazil, which won a WTO complaint, rather than shake-up the regime.

Reform of cotton subsidies has proved a sticking point of the Doha trade round, and a subject of particular interest to West African cotton producers.

Biggest payers

The US provided $319m to cotton growers in direct subsidies in 2010-11, a 29% drop year on year, but leaving the country only just behind China in the support league, ICAC data show.

China, which produces nearly twice as much of the fibre as the US, slashed its subsidies by 83% to $329m.

Turkey, which pays a premium per kilogramme of seed cotton, raised its support, by 17.7% to $306m, reflecting an increased harvest.

And the European Union lifted its support by 4.2% to $368m.

This increase reflects the weakness of the dollar. Nonetheless, the EU was the most generous subsidy payer – with a support programme which works out at some $350 a bale, or more than 70 cents a pound.

Cotton futures for December stood at 105.75 cents a pound, down 1.1%, in early deals on Friday.

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