Amado Kafando tilted his head back, smiled, and pumped his fists high into the West African sky. “We praised God, and said, ‘At last!’” Kafando, 45, told Bloomberg News, while standing amid the mud huts where he lives with 11 children and no electricity.
His elation followed news on March 7 that the price of cotton, a crop he plants each summer in rows broken by a cow-tethered plow, hit a record $2.197 per pound, capping a two-year surge of 430%. Finally, he said, cotton could fulfill the promise of its nickname in his homeland of Burkina Faso: white gold.
Within weeks, Kafando was clenching his fists again, this time in anger. The government and regional cotton monopolies, which Burkinabe farmers must sell to, announced they would charge growers 38% more for fertilizer – and pay them as little as 39% of the world price at the time for their crop, the Bloomberg report continues.
“It was as if they pulled our legs out,” he said.
Thousands of the nation’s farmers took to the streets in May, threatening to do the unthinkable – boycott planting the top cash crop in one of the world’s poorest countries.
A few days earlier, on the other side of the Atlantic Ocean, Jerome Vick settled into an oxblood-colored leather chair and declared he would do precisely the opposite. “We’re going to put in as much cotton as we can,” said Vick, 61, waving his gnarled hands toward the 5,000 acres his family farms in Wilson, North Carolina.
Merchants Double Up on Growers
The Vicks have already locked in a price of about $1.25 per pound — more than double what Kafando will get — for about 40% of their harvest late this year. If the Carolina weather continues to cooperate and prices stop their recent slide, they expect a profit as high as $1 million, enough to add 300 acres.
The divergent fortunes of Kafando and Vick aren’t the result of differences in product quality. As it’s grown in the field, hand-picked West African cotton can be superior to that sprouting on the flatlands of North Carolina or Texas.
Nor is it about subsidies. Throughout much of the last decade, U.S. price supports were credited with Vick’s prosperity and blamed for the poverty in Kafando’s country. They artificially depress world prices, the argument went, robbing African farmers of the only cash most get each year. It was a debate that derailed World Trade Organization talks in 2003.
With cotton prices reaching record levels even though U.S. support programs remain, it’s clear the conventional narrative ignored more significant forces right outside the gates of African farms, said John Baffes, a senior economist at the World Bank who studies the global cotton trade.
The Only Choice: Selling to Government Monopolies
Burkinabe farmers have no choice but to sell to government-sanctioned monopolies whose shareholders include trading firms such as Paris-based Geocoton and Paul Reinhart AG of Winterthur, Switzerland. In March, as cotton was hitting historically high prices in the U.S. a committee dominated by the monopolies altered the formula for setting the price each farmer gets. That cut payments for last season’s crop by 39% and reduced the base price announced in April.
This should have been a year “when people can finally get a few dollars and put a metal roof on their house,” said Thomas J. Bassett, a geography professor at the University of Illinois who has been studying and writing about West African cotton farmers for more than 20 years. “These mechanisms result in poverty for producers and wealth for companies and traders. It’s subtle and it’s dastardly.”
Representatives for the three regional cotton monopolies in Burkina Faso (SOCOMA, Faso Cotton and Sofitex) declined Bloomberg’s multiple requests for interviews. They also denied requests for financial statements or other disclosures.
Among the biggest shareholders in SOCOMA and Faso Cotton are closely held international commodities trading firms. They enjoy privileged positions, according to an unpublished April 2010 report done for the United Nations’ Food and Agriculture Organization, sitting in the middle of a supply chain stretching from African cotton fields to factories that make blue jeans, T-shirts, and other clothing items.
Yannick Morillon, chief executive officer of Geocoton, the majority shareholder of SOCOMA, defended changes to the price formula this year. SOCOMA would have suffered a $8.4 million loss if the formula hadn’t been changed, Morillon said. Cotton companies in Burkina Faso had contracted to sell most of their fiber before the price surged in the second half of 2010, according to a March 31 report by consultants hired to propose changes to the formula.