African Cotton: Reducing Contamination Will Generate Premiums

Income of cotton farmers, as well as that of ginners, is a function of the quantity produced and the price achieved. The price depends on the quality delivered. With regard to quantity, yields have been stagnating and even falling in Africa for years despite large technical assistance projects. Yields in Francophone Africa dropped from 382 kgs/hectare (ha) of lint in 2011/12 to 371 kgs/ha in 2012/13, while in Anglophone Africa they dropped from 247 kgs/ha in 2011/12 to 208 kgs/ha in 2012/13. In comparison world average yields were 771 kgs/ha in 2011/12 and 793 kgs/ha I 2012/13.

In terms of price, African cotton stakeholders have no influence on world market prices and are, in fact, price takers. It remains the function of quality where a difference could be made. Quality refers to the intrinsic fibre characteristics as well as the level of contamination of cotton lint with external matters. The intrinsic quality parameters depend on cotton seeds, soil conditions, climate, and harvesting methods, etc. and can be measured through instrument testing.

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These parameters, therefore, become transparent parameters that are reflected in price differentials. The quality parameters for contamination of cotton, however, cannot easily be measured unless each and every bale is opened by hand and cleaned. Therefore, the reputation of the origin plays a crucial role in whether or not premiums can be achieved above the price determined by the intrinsic quality parameters or whether the cotton is being discounted.

Improving contamination in the African context needs to address the physical reduction of contamination levels as well as improving the reputation in the market. Both aspects need to be addressed to change a negative perception that prevails with regard to African cotton.

Several West African cotton-producing countries already benefited from projects that targeted contamination reduction. The measurable positive results of these projects that actually reduced contamination levels, however, did not lead to increased prices, as spinning mils were not involved in the process.

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The direct involvement of spinners is crucial for two reasons. Firstly, spinners have the technical expertise and thus can explain best to ginners and farmers what kind of contamination is harmful to the spinning process and which contaminants cause lesser problems.

Moreover, they can relate contamination levels directly to costs involved at the spinning mill in terms of additional staff costs, investment in contamination detection machines, re-baling machines, etc., as well as financial losses for spinning mills if contaminants find their way into yarn, fabric and garments. These additional costs and risks of claims are factored into the price in terms of negative premiums. Thus, spinners are able to technically train and persuasively convince ginners and ultimately farmers to take important steps along the value chain to reduce cotton contamination.

Secondly, cotton traders, that buy almost all African cotton, on the other hand, have in many instances not been able to convincingly provide feedback on cotton quality necessary for ginners to improve their product. The reason for this is twofold. First, not all traders are willing, able or qualified enough to provide feedback on cotton quality to ginners. And secondly, even if traders could provide technical sound feedback on contamination issues at the gin and farm level, ginners mistrust traders with the suspicions that the latter will provide negative feedback to reduce prices.

It is therefore vital to develop direct technical linkages between producers (ginners) and consumers (spinning mills), even if trade is done through merchants. Sustainable quality improvements at gin (and farm) level, in terms of reduced contamination, only translates into premiums if the ultimate cotton consumers (spinning mills) are involved in the process. Their involvement will lead to the necessary trust that contamination levels are substantially reduced and will change the prevailing perception that African hand-picked cotton is contaminated.

Based on this insight, ITC has been working with several Asian spinners to support selected African ginners to reduce contamination and adhere to buyer requirements. Two Bangladeshi and one Thai spinner trained 22 ginners in Tanzania, including 201 ginning staff and operators and 910 farmers. In addition, a training film on contamination reduction was created in a spinning mill that gives insights to ginners and farmers into why contamination is an important quality factor. A second film was developed with Square Textiles, a large Bangladeshi spinning mill, highlighting the negative impact of contamination on quality and prices but also the potential African cotton has to achieve premiums if this issue could be successfully resolved, jointly with the client.

However, a single season of training would not be enough to sustainably reduce contamination levels and to build the necessary trust in the buyer that will change a negative perception. For that reason, ITC continues to address this issue and will facilitate further training.

Moreover, the Tanzania Cotton Board will roll out a larger training programme at farm and buying-post level in Swahili utilizing the knowledge and material provided by spinners. As spinners will be part of this approach all along, it is expected that reduced contamination levels will translate into premiums or, at least, reduced discounts for Tanzanian cotton. The approach could be repeated in other cooperating countries.

Disclaimer: Views expressed in this article are the contributors’ and do not necessarily coincide with those of ITC, UN or WTO. Designations employed do not imply the expression of any opinion on the part of ITC concerning the legal status of any county, territory, city or area, or of its authorities or its boundaries; or the endorsement of any firm or product.

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