Cotton plays a critical role in Mali’s economic development. It is the second source of export revenue after gold and the primary source of livelihood for more than four million people. Cotton production is purchased by the parastatal CMDT (Compagnie Malienne pour le Développement du Textile) at a guaranteed price. This year, due to COVID-19, cotton production is beset by uncertainty, as we wrote in the last blog. Here we give more details on how the COVID-19 pandemic could lead to a cotton crisis coupled with an economic and social crisis.
Following the drop in the world cotton price - from 1.7 to 1.4 USD/kg (i.e. 20% drop) between January and April 2020- the initial guaranteed price was reduced from CFAF 275 to 250 per kilogram (i.e. 9%). This price reduction was not well accepted by the cotton producers, who decided to boycott cotton cultivation for the 2020/21 crop year. As a result, cotton areas have significantly shrunk. According to the CMDT, only 26,632 hectares out of a forecasted 810,000 hectares (3%) were sowed with cotton as of June 20th. This is in sharp contrast with last year, when about 365,450 hectares (or ~47% of the forecasted area) were already sowed with cotton at that time. Given that sowing takes place during the month of May and June, it is becoming increasingly clear that Mali’s 2020/21 cotton production is in jeopardy. This cotton crisis will likely affect the other sectors of the economy.
The cotton boycott will likely affect farm households in three ways. First of all, many farm households depend on cotton sales to generate income. Without cotton sale, farm households will likely be more liquidity constrained. Secondly, since access to fertilizer is facilitated by the CMDT, farmers who boycott cotton production will likely have a limited access to it, which in turn, will lead to reduce fertilizer use and potentially to lower crop yields. Thirdly, lower cotton production means less cottonseed cakes will be produced to feed animals, which could impact animal health and production.
The sharp decline in cotton production threatens the financial situation of the CMDT and cotton-related processing/manufacturing industries. In addition to ginning, the CMDT is involved in the milling of cottonseed oil, textile, through the ITEMA (Industries Textiles du Mali) and COMATEX (Compagnie Malienne des Textiles), and manufacturing of batteries for cotton sprayers. Cotton is a raw material for many industries. A crisis in cotton production will likely have adverse economic and social consequences on these industries, including job losses.
The cotton sector contributes to trade activities, particularly through the sale and transport of agricultural inputs (i.e., fertilizers, herbicides, pesticides) and cotton outputs and promotes financial development. The Banque de Développement du Mali (BDM), Banque Nationale de Développement Agricole (BNDA) and microfinance institution Kafo Jiginew, are all financial institutions involved in the Malian cotton sector. A cotton crisis will likely have negative impacts on the financial activities.
The cotton sector has been and continue to be central to Mali’s economy. The ongoing cotton crisis will not spare any sector of the Malian economy and will affect many stakeholders. Hence, there is a need for a change of paradigm and all stakeholders should be involved in the search for a concerted solution to the crisis in the cotton sector.