Subsidies to The Cotton Industry Have Declined in 2013/14 Compared to a Year Earlier

Subsidies to the cotton industry have declined in 2013/14 compared to a year earlier, according to a new report released by the International Cotton Advisory Committee (ICAC).

The report titled ‘Production and Trade Policies Affecting the Cotton Industry’, prepared by the ICAC secretariat estimates subsidies, including direct support to production, border protection, crop insurance subsidies, and minimum support price mechanisms, at US$ 6.5 billion in 2013/14 cotton year.

The estimated amount of subsidies to the cotton industry in 2013/14 is lower compared to the record $7.4 billion subsidies in 2012/13.

Under the heading ‘Government Support to the Cotton Industry’, the report states that a total of ten countries provided subsidies in 2013/14 to the cotton industry, and the subsidies averaged 26 cents per pound, the same as in 2012/13.

The ICAC Secretariat has been reporting government measures in cotton in 1997/98 season, and it has found that there is a strong negative correlation between subsidies and cotton prices. “In years when prices are high, subsidies tend to decline and in years when prices are low, subsidies tend to rise,” the report mentions.

In 2013/14 season too, the negative correlation continued. As the Cotlook A Index increased from an average of 88 cents per pound in 2012/13 to an average of 91 cent per pound in 2013/14, subsidies provided to cotton growers declined.

In some countries, such as Brazil, India, Pakistan and Mexico, minimum support price (MSP) programs were not triggered during 2013/14 because market prices were above the government intervention prices.

The share of world cotton production receiving direct government assistance, including direct payments and border protection, increased from an average of 55 percent between 1997/98 and 2007/08, to an estimated 84 percent in 2008/09. During 2009/10 through 2013/14, the share declined and averaged 47 percent. In 2013/14 the share of production receiving direct assistance is estimated at 44 percent.

Some countries provided subsidies for cotton inputs in 2013/14, especially for fertilizers, storage, transportation, classing services and other marketing costs, the report mentions. (RKS)