Current int'l environment threatens Africa's cotton sector

The news from the international markets are not good for African cotton companies. Sodecoton, the flagship of the cotton sector in Cameroon thus feel threatend by this development.

Indeed, in addition to world prices which "have lost 30% of their value since August 2013", analysis Commodafrica, China, which currently controls 60% of the world market for cotton, accumulated stocks estimated at 11 million tonnes.

As such, Frédéric Viel, president of the French Association of cotton (Afcot) revealed that, "exports of cotton from Africa to China could then fall to 120,000 tonnes in 2015, which is 2 times less than 2014 and 3 times less than that of 2012. Associated with the decline in world prices, the considerable decline of Chinese imports will be "a difficult problem for the African cotton company’s equation."

From this point of view, Sodecoton, which one of the main destinations of exports is China, and whose 2014 production, projected to 240,000 tons, represents twice the aggregate of the forecasts of African imports from China in 2015 (120,000 tonnes out of a total of 894,000 tonnes), could suffer a slump in sales of its product next year, if not obliged to accept a sale price of kg of raw cotton at a discount.

This situation could also boost the practice of the escape of the Cameroonian production to Nigeria, already very prejudicial to the company; practice orchestrated by local producers who receive the Sodecoton campaign credits.

The different shortfalls that would ensue would make vulnerable the flagship of agribusiness in the Cameroonian septentrion, which could then hardly deliver on commitments from local banks that generally finance cotton campaigns.

Although no information on these difficulties filter from Sodecoton, Commodafrica already announced that this global situation of the cotton market will be tougher for the countries in West Africa, "where cotton production should jump by 16% to 1.8 million tonnes as forecasted by the U.S. Department of Agriculture (USDA).

For example, for Burkina Faso, whose production is estimated at 700,000 tonnes in 2014/15, the deficit would be $12 billion CFA francs. Smoothing Fund will cover only about 5 billion CFA francs and in other countries where such a mechanism does not exist.