Capturing the Margins: World Market Prices and Cotton Farmer Incomes in West Africa

World Development Vol. 59, pp. 408–421, 2014 Ó 2014 Elsevier Ltd. All rights reserved. 0305-750X/$ - see front matter www.elsevier.com/locate/worlddev

http://dx.doi.org/10.1016/j.worlddev.2014.01.032

Capturing the Margins: World Market Prices and Cotton Farmer Incomes in West Africaq THOMAS J. BASSETT * University of Illinois at Urbana-Champaign, USA Summary. — World cotton prices soared to record levels in March 2011, reaching $2.20 a pound in contrast to 40–80¢/pound between 2000 and 2010. The price spike serves as a natural experiment that offers insights into the relationship between world cotton prices and producer prices in West Africa. A comparative study of Burkina Faso and Coˆte d’Ivoire shows that national and regional level processes such as price setting mechanisms, inequalities in knowledge and power, and the oligopsonistic structure of West Africa’s cotton economies exert a strong influence on the share of world market prices that producers ultimately receive. Ó 2014 Elsevier Ltd. All rights reserved. Key words — cotton, Burkina Faso, Coˆte d’Ivoire, price transmission, agricultural subsidies, market structure

increases in world cotton prices would result in higher producer prices (Alston, Sumner, & Brunke, 2007; Delpeuch, 2011). The protests in Burkina Faso in the spring and summer of 2011 brought the world’s attention to the political economy of cotton price transmission and its effects on smallholder livelihoods (Simpson & Katz, 2011). The producer price for seed cotton in Burkina Faso had been set in late-March at 245 West African francs (CFAf) (about 50¢) per kilogram by the Interprofessional Cotton Association of Burkina Faso (AICB), a regulatory authority governed by representatives of the Burkina government, the three cotton companies that buy all of the seed cotton in the country, and farmers themselves who are organized into the National Cotton Producers Union of Burkina (UNPCB). As in other West and Central African (WCA) countries where cotton sectors are strongly regulated, Burkina’s interprofessional cotton association uses a price setting mechanism to determine the price of seed cotton for the upcoming season. The price setting tool forecasts world market prices, currency exchange rates, expected production levels, and how revenues will be divided between producers and cotton companies. Similar interprofessional associations and price setting mechanisms exist in the neighboring countries of Mali and Coˆte d’Ivoire (Baghdali, Cheikhrouhou, Raballand, & Le Gall, 2007; Fok, 2007). In all three countries, the producer price for 2011–12 was higher than previous years but it was half of what US cotton growers were earning that year for their lower quality crop (Simpson & Katz, 2011). Burkina’s dissident cotton growers circulated petitions and organized marches in April and May of 2011 to demonstrate

“Sophisticated, the [price setting] mechanism is only completely understood and mastered by a very small number of actors; even if they are far from understanding its calculations and subtleties, farmers seem to have confidence in the mechanism” (Estur, Gergely, & Cordier, 2011).

1. INTRODUCTION On July 11, 2011, police and gendarmes descended into a rural cotton growing community in southwestern Burkina Faso to arrest farmers. The farmers were so angry over low cotton prices that they refused to grow cotton. When their neighbors refused to participate in the boycott, they destroyed 100 hectares of their cotton (Kam, 2011). The crop destruction was a violent turn in an initially peaceful boycott of cotton growing by Burkinabe` farmers who had been protesting the official producer price for seed cotton. 1 They were angry because they knew that lint cotton was selling for more than $2 a pound on world markets but that they would only receive a quarter of that price for their high quality crop (Bognini, 2011). West African farmers sell seed cotton to cotton ginning companies. Seed cotton refers to unginned cotton in which the fiber is still attached to the seed. The seed is removed during the cotton ginning process. Ginned cotton, fiber without its seed, is called lint cotton. The average ginning rate in West Africa is 42–43%. That is, for every 100 kg of seed cotton, ginning companies produce 42–43 kg of fiber. Thus, farmers produce seed cotton, cotton ginning companies produce lint cotton or cotton fiber. 2 Ginning companies sell fiber to textile mills and international cotton traders based on the quality of the lint (e.g., fiber length, color, strength, etc.). The question is, what share of the world market price do West African farmers receive for their high quality crop? This question is important to not only cotton growers and their families but also to international aid organizations like the World Bank and the French Development Agency, national governments, and non-governmental organizations like Oxfam who view cotton growing as a potential means of moving millions of people out of poverty. 3 Most attention has focused on the adverse effects of African market structures on producer prices (Poulton & Tschirley, 2009), the effects of US agricultural subsidies on world market prices (FAO, 2004; Sumner, 2006), and whether

* I want to thank Malini Rangathan, Matt Winters, Rachel Schurman, Carol Spindel, and two anonymous reviewers for their helpful comments on earlier versions of this paper. Thanks also to Jesse Ribot for suggesting the paper’s title, to John Baffes and Alejandro Plastina for price data, and to my many cotton contacts in Coˆte d’Ivoire for generously sharing their knowledge of the inner workings of the country’s dynamic cotton economy. Final revision accepted: January 16, 2014. q An early version of this paper was presented at the Social Dimensions of Environmental Policy symposium, Mapping Vulnerability: Maps, Narratives, and Political Action, University of Illinois at UrbanaChampaign, September 23–24, 2011. 408

CAPTURING THE MARGINS: WORLD MARKET PRICES AND COTTON FARMER INCOMES IN WEST AFRICA

their discontent with the outcome of the price setting negotiations. They demanded a doubling of the producer price for seed cotton to 500 CFAf per kilogram and much lower fertilizer prices. Karim Traore´, president of UNPCB and chair of AICB’s price setting cotton sector management committee, tried to diffuse tensions among union members by explaining that the producer price was “not set by chance” but by a fair and “transparent” price setting mechanism (Bakouan, 2011). He exclaimed that the 2011–12 seed cotton price was the highest ever received by cotton growers and dismissed the call for 500 CFAf cotton as utopian. Farmers disagreed and felt betrayed by the UNPCB leadership. 4 The boycott continued throughout the growing season. During the month of July protesting farmers destroyed 225 hectares of cotton in one cotton growing region. One person died and many more were injured by police during the protests (Ouedraogo, 2011). The confrontations taking place in Burkina Faso’s cotton growing areas were not unique. Smallholder cotton growers in neighboring Coˆte d’Ivoire were also engaged in heated discussions with representatives of the country’s monopsonistic cotton companies on the distribution of record world market prices. The high stake encounters that took place across the region are instructive because they bring into focus the politics and institutions that mediate price transmission from global to national markets. These politics and institutions are often missing in the debate on the effects of agricultural subsidies in the global North on farmer incomes in the global South. A major assumption of this literature is that if the tradedistorting subsidies were eliminated, then world market prices and the incomes of smallholder cotton growers would significantly rise (Alston et al., 2007; FAO, 2004; Oxfam, 2002). This paper’s focus on the political economy of price formation in West Africa offers insights into the domestic challenges faced by smallholder farmers in realizing the assumed benefits of potential subsidy reforms in the global North. Its focus on power relations between producers and national cotton companies during the annual price setting negotiations demonstrates the importance of national and regional-scale relationships that strongly influence producer prices. Indeed, the main argument of this paper is that West African farmers will benefit from buoyant world cotton prices only if they are able to negotiate a significantly higher price at the national level where price setting mechanisms and monopsonistic markets determine their share of world market prices. This paper’s attention to national level processes does not mean that global-level dynamics are unimportant. If the 2011 global price spike in cotton is indicative, the elimination of cotton subsidies in the USA could have significant effects on world market prices, which could, in turn, have a major impact on the incomes and livelihoods of smallholder cotton growers in West Africa. 5 Indeed, the cotton price spike of 2011 serves as a natural experiment that allows us to see what effects the elimination of subsidies might have on prices paid to African cotton producers. Three research questions structure this paper. What is the relationship between world cotton prices and producer prices in West Africa? What is the relationship between price formation and power relations in West Africa’s cotton economies? Why didn’t West African cotton growers’ incomes significantly increase during the 2011 cotton boom? To answer these questions, the paper examines the structure of the partially privatized cotton economies of Burkina Faso and Coˆte d’Ivoire and the implementation of their annual price setting mechanisms. Detailed analysis of the 2011–12 price setting negotiations in Coˆte d’Ivoire illuminates the institutions and power relations that disproportionately benefit cotton

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companies over cotton growers. The paper concludes with a summary of the challenges facing cotton growers as they seek to obtain a larger share of world market prices in the context of national cotton sector reforms. 2. RESEARCH METHODS This study is inspired by research originally conducted in Burkina Faso, Mali, and Coˆte d’Ivoire for Oxfam America in 2004 in the context of its Make Trade Fair campaign (Bassett, 2008). That research focused on the cotton value chains of these three countries and the likelihood of farmers benefiting from any increase in world market prices in the event that the US and EU ended their cotton subsidy programs. I interviewed cotton company officials, farmer organization representatives, agro-input suppliers, aid donors, cotton consultants, farmers, and researchers on various aspects of the cotton value chain. That study showed farmers fighting for their fair share of cotton earnings on multiple fronts. At the national level, they actively put pressure on cotton companies to raise producer prices and to reduce costly fertilizer and pesticide prices. At the global scale, the C-4 countries (Benin, Burkina, Chad and Mali) and Brazil demanded that the World Trade Organization rule against the United States’ cotton subsidy program (Baffes, 2011). However, the larger question of whether West African farmers would ultimately benefit from higher world market prices remained largely hypothetical. In the absence of any significant reforms of US and EU cotton subsidy programs, the distribution of any fair trade bonus was uncertain. The spike in world market prices in 2011 presented an opportunity to examine this distribution question in more detail, despite the lack of subsidy reform in the global North. The present study is based on four months of field research in Coˆte d’Ivoire in 2011–12 and 2012–13 and updated information on Burkina Faso derived from cotton sector documents and newspaper accounts. In Coˆte d’Ivoire I interviewed the representatives of cotton companies, cotton growers, and the Ministry of Agriculture who participated in the price setting negotiations in 2011. These interviews were complemented by interviews and documents provided by Intercoton, Coˆte d’Ivoire’s interprofessional cotton sector association that organizes the annual price setting negotiations. 3. COTTON PRICE TRANSMISSION Price transmission analysis examines the relationship between changes in prices in one market on prices in another market (IFPRI, 2012). The following analysis studies the relationship between the world market price of lint cotton and the producer price of seed cotton in West Africa. The unit of analysis is a kilogram of lint cotton in West African CFA francs. 6 I use a regional ginning rate of 43% to convert seed cotton to lint cotton. Since cotton is sold in US dollars in world markets, I use the average exchange rate between the US dollar and CFA franc during the December–March ginning period to determine world cotton and producer prices in CFA francs. Figure 1 shows the trend in producer prices in relation to world market prices based on the Cotlook A indicator for the period 1995–96 to 2012–13. Since West African cotton is not quoted on stock exchanges, the A index is commonly used as a proxy measure (Baffes, 2005; Fok, 2005). 7 The graph demonstrates that a major effect of the price setting mechanisms has been to stabilize domestic prices under conditions of fluctuating world market prices. No co-movement in prices

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Figure 1. World market and producer prices for a kilogram of cotton lint for eight west and central African countries, 1995-96 – 2012-13. Source: ICAC, World Bank.

is discernable, an observation made by other cotton market analysts (Alston et al., 2007; Baffes, 2009). There is a lag effect in the producer price and the Cotlook A price that is noticable in Figure 1. This one-year lag is due to the fact that prices negotiated at interprofessional meetings each spring are for the upcoming season. When world prices were at record highs in the spring of 2011, the producer price in Coˆte d’Ivoire was 200 CFAf/kg of seed cotton. That price was set the previous year (April 2010) during price setting negotiations. When cotton companies and growers met in April 2011 during the booming cotton market, they set the price for the upcoming season (2011–12). Thus the higher producer price (265 CFAf/kg of seed cotton) negotiated for 2011–12 is shown as an uptick in Figure 1 although the average Cotlook A price had declined by 48% from the previous year. Figure 2 demonstrates that price stabilization via the price setting mechanism has been at a relatively low level. The graph illustrates the producer’s share of world market prices in eight WCA counties. It shows that for many years this share was

well below 60%. The average share for these countries in 2010–11 was a mere 23%. Although there is no clear year-to-year relationship between world market prices and producer prices, some analysts argue that price transmission could take effect though the price setting mechanism over the medium and long term. In their study written to inform Oxfam’s Make Trade Fair campaign, Alston and colleagues compare world prices and producer prices for Benin, Burkina, Chad and Mali before and after the devaluation of the CFA franc in 1994 (Alston et al., 2007). Between 1985–93 and 1998–2006, the Cotlook A index increased from approximately 200 CFAf per pound of cotton fiber to 325 CFAf per pound. The average producer price increased from 100 to 200 CFAf per pound between the same periods. They conclude that about 80% of the change in world cotton prices was transmitted to smallholders (Alston et al., 2007). They use this high transmission rate as well as a more conservative 50% rate to assess the potential benefits to West African cotton growers in the event that US agricultural subsidies were eliminated and a permanent increase in world cotton prices took place (Alston et al., 2007). When one compares producer prices and world market prices for more recent years, the conservative estimate may be closer to reality. Table 1 indicates the average world market (Cotlook A) price and producer prices in eight West African countries for 1995–2009 and 2010–12. It shows that the world price increased by 613 CFAf between the two periods while the producer price rose by 131 CFAf/kg of fiber. Just 21% of the world market increase was transmitted to farmers. We need a longer time series for the second period before drawing any definitive conclusions about recent price transmission trends. The existing data suggest, however, that other actors in the cotton value chains are benefiting most from recent price movements. Price transmission analysis is useful for detecting price trends over time but it cannot explain these trends. Interpreting these results requires additional considerations and analysis. It is possible, for example, that cotton company ginning and transportation costs increased between these periods. These costs are notoriously high and difficult to verify, especially ginning costs. Producers and analysts alike consider them to be unreliable and a potential source of profit taking

Figure 2. The producer’s share of the Cotlook A price for eight west and central African countries, 1995-96 – 2012-13. Source: ICAC, World Bank.

CAPTURING THE MARGINS: WORLD MARKET PRICES AND COTTON FARMER INCOMES IN WEST AFRICA Table 1. Cotton price transmission for eight West African countries between 1995–2009 and 2010–2012 Source: ICAC, World Bank. Period

1995–2009 2010–12 Difference

Cotlook A ave (CFAf/kg fiber)

Ave producer price (CFAf/kg fiber)

Price transmission (%) between periods

778 1391 613

416 547 131

– – 21

(AFFICOT, personal communication, December 14, 2011; Baffes, 2009; Bassett, 2008; Ravry, Pesquet, Gergely, Estur, & Bioche, 2006). Although impossible to ascertain, cotton company operating costs figure importantly in price setting negotiations (see below). 4. THE POLITICAL ECONOMY OF PRICE TRANSMISSION IN WEST AFRICA The cotton subsidy debate reveals the interplay of multiple institutions and practices that complicate the assumed direct benefits of eliminating trade distorting subsidies in the global North on smallholder incomes in West Africa (Baffes, 2011; Delpeuch & Leblois, 2013; Delpeuch & Vandeplas, 2013). These mediating relationships include national market structure and sector governance, currency exchange rates between the West African franc (CFAf) and the US dollar, and agricultural performance (yields, cotton quality) in producer countries. The literature on market structure and performance is most relevant to this paper’s focus on the relationship between world prices and producer prices. Agricultural economists posit a strong relationship between the organization and regulation of cotton sectors and the prices received by producers (Tschirley et al., 2009). Poulton and Tschirley (2009) distinguish, for example, between market-based and regulated cotton sectors. Regulated sectors are those in which no competition is allowed in the purchase of seed cotton. The characteristic types are national and local monopsonies. Market-based sectors, in contrast, are characterized by the presence of “many” buyers of seed cotton (competitive) or just a few (concentrated) (Poulton & Tschirley, 2009, 45–46). The cotton sectors of West and Central Africa (WCA) tend to be regulated or hybrid types that contain some competition in some areas (services) but not in others (producer prices). Tanzania’s cotton economy is representative of a competitive market-based sector in eastern Africa (Delpeuch & Vandeplas, 2013). Between the 1960s and 1990s, all of WCA’s cotton sectors were defined by their monopsonistic structure. Public–private (parastatal) companies dominated input delivery and the purchase of seed cotton. The monopsonistic model emerged in Coˆte d’Ivoire in 1962 when the French parastatal CFDT (la Compagnie francßaise pour le de´veloppement des fibers textiles) signed an agreement with the newly independent government to diffuse the high yielding Allen cotton variety throughout the country. CFDT successfully argued that it needed exclusive control over cotton markets in order to control cotton varieties and the distribution of fertilizers and pesticides. During the first half of the 20th century, Mande´-speaking Jula traders dominated the cotton trade in Coˆte d’Ivoire largely because they offered higher prices to producers than French merchants (Bassett, 1995). As a result, most West African cotton stayed within the region where it was consumed by the local weaving industry (Bassett, 1995). The “CFDT system”

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succeeded in eliminating African merchants from the cotton trade and in supplying France’s textile industry with its primary commodity. The monopsonistic CFDT system spread to other former French colonies in West Africa with the support of French development aid (Bassett, 2001) and African governments. The latter found monopsonies to be efficient partners for transferring revenues from rural producers to the state via marketing boards (Bates, 1981). Parastatal organizations like CFDT facilitated this political–economic goal of West African states at the same time that they served the interests of the French textile sector as well as the French government which was keen to maintain economic ties with its former colonies (Bassett, 2001). Price setting mechanisms were also instituted at this time. To motivate increased production for the market, the French West African government created a price stabilization fund for cotton in 1955. 8 The fund aimed to reduce price volatility and thus encourage farmers to grow more cotton. This colonial-era marketing board became a national institution at political independence (Bassett, 2001). For example, in 1964 the Coˆte d’Ivoire government created a publically owned corporation called the Coˆte d’Ivoire Price Stabilization Fund or “Caistab.” 9 The fund set the producer price for seed cotton at 33.50 CFAf/kg that year. Caistab entered into an agreement with CFDT and the future CIDT 10 in which the cotton company would be reimbursed for more than a dozen production and operating costs (Campbell, 1984; Fok, 2007). If the world market price for lint cotton was lower than CFDT’s operating costs, Caistab would transfer funds to the cotton company to cover its deficits. This arrangement lasted until the 1990s when the World Bank intervened in the Ivorian economy in the context of a series of structural adjustment programs. Two major policy reforms that affected the cotton sector were the partial privatization of CIDT and the creation of a new price setting mechanism. (a) From monopsonies to oligopsonies The World Bank-led privatization process of West Africa’s cotton economies can best be described as “partial” in both senses of the word—incomplete and biased. Prior to 2000, the cotton sectors of Burkina Faso and Coˆte d’Ivoire were vertically integrated structures in which parastatal cotton companies regulated all phases of production and marketing. In Coˆte d’Ivoire, the semi-public cotton company, CIDT, supplied inputs to producers on credit, controlled the buying and ginning of seed cotton, and held the exclusive right to market lint cotton. Most of the country’s cotton is exported with the bulk of it going to East Asia. Less than 1% of the country’s ginned cotton is consumed by the local textile industry (ACE, 2012). In Burkina Faso the parastatal cotton company, Sofitex, held monopsonistic control over the cotton economy and exported more than 85% of its cotton (World Bank, 2010). CFDT, the former French colonial cotton company, was a minority shareholder and principal cotton trader in both countries. Privatization transformed these national monopsonies into regional monopsonies in which the new cotton companies were given exclusive rights to purchase the seed cotton grown in their zone (Figure 3). Coˆte d’Ivoire’s cotton sector privatization set the precedent and is a good example of partial privatization. The country’s ten gins were divided into three lots and put up for sale in 1988 (Bassett, 2002). The first set, clustered in the northwest, was sold to a consortium comprised of the Agha Kahn company and A.G. Reinhart. They established the Ivoire Coton company based in Boundiali. The Mali-based Aiglon Limited

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Figure 3. Institutional structure of the oligopsonistic cotton economies of West Africa.

purchased a second cluster located in the northeast. It formed the LCCI cotton company with its headquarters in Korhogo. The third cluster, located in the center of the country, did not sell. It was retained by CIDT, which reorganized into “the New CIDT,” owned 100% by the Coˆte d’Ivoire government (Figure 4). 11 In Burkina Faso, a 2004 privatization agreement led to the breakup of Sofitex into three companies: the Socie´te´ Cotonnie`re du Gourma (SOCOMA) in the southeast which is today controlled by Ge´ocoton (formerly Dagris and CFDT); Fasocoton in the center owned by the Swiss cotton trader, A.G. Reinhart (also a major shareholder in Coˆte d’Ivoire’s Ivoire Coton company); and Sofitex, the semi-public cotton company which retained the most productive cotton growing area and which accounts for nearly 90% of national

cotton production. The cotton growers’ union, UNPCB, is a minority shareholder in all three cotton companies. The privatization agreements in both countries gave the three new companies exclusive rights to the cotton produced in their zones for a limited period. In Coˆte d’Ivoire, these monopsonistic rights ended in 2002 when a new ginning company, SICOSA, appeared on the scene. The gin was built by the cooperative farmers’ union, URECOS-CI, in association with the US cotton gin manufacturer, Continental Eagle. SICOSA boldly declared that all of Coˆte d’Ivoire was its cotton zone. The end of exclusive zones opened the door to “sideselling.” That is, farmers obtained agro-inputs on credit from one cotton company but sold their crop to another gin without paying back their credit. Debt levels soared and the sector went into a tailspin. LCCI went bankrupt in 2008 from a combination of poor management and side selling. Ivoire Coton bought its M’Bengue´ gin; Olam, a Singapore-based company, bought its Ouangolodougou gin, and a new Korhogo-based company, the Compagnie Ivoirienne de Coton (COIC), 12 bought LCCI’s two Korhogo gins. Although Coˆte d’Ivoire’s cotton companies lost their legal monopsony to the cotton produced in “their” zones, they retained a de facto monopsony for two principal reasons. First, there is no price competition for seed cotton in Coˆte d’Ivoire. The purchase price is set each year by an interprofessional association (Intercoton) for the entire country. Second, cotton growers are obliged to sell their cotton to the company that supplies them with fertilizers and pesticides on credit so that they will pay back their loans at the market place. This input credit and loan repayment arrangement effectively ties farmers to cotton companies in a contract farming-like relationship–as long as side-selling is controlled. 13 A recent industry agreement formally prohibits companies and producers from engaging in side-selling and thus strengthens the monopsonistic structure of the filie`re (Intercoton, 2011a). Burkina Faso’s cotton companies continue to control cotton markets in their designated zones. In summary, the privatization process in Burkina Faso and Coˆte d’Ivoire did not lead to a competitive cotton sector. It led, rather, to the creation of sub-national monopsonies. Cotton companies dominate cotton growing in their zones

Figure 4. The cotton company zones of Coˆte d’Ivoire (1998–2002) and Burkina Faso (1998–present).

CAPTURING THE MARGINS: WORLD MARKET PRICES AND COTTON FARMER INCOMES IN WEST AFRICA

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Figure 5. Cotton production in Coˆte d’Ivoire by sub-prefecture and region, 2012–13. Source: ACE, 2012.

via pan-territorial pricing and the exclusive buying of seed cotton in their geographical areas (Bassett, 2008). This “middle-of the-way type liberalization” is hardly conducive to producers receiving a higher share of the world market price for their crop (World Bank, 2010, p. 34). Figures 5 and 6 depict the main cotton growing areas of Coˆte d’Ivoire and the degree of competition for that cotton by ginning companies. Figure 5 shows the distribution of cotton grown at the sub-prefecture level. Although cotton was cultivated in 81 sub-prefectures, just 12 accounted for twothirds of total production. Figure 6 indicates the degree of competition for this cotton by ginning companies in 2011– 12. The map classifies each sub-prefecture into one of three groups, monopsony, concentrated, and competitive, following Poulton and Tschirley’s categorization (Poulton & Tschirley, 2009). Monopsonistic conditions exist where just one company purchased all of the cotton grown in a sub-prefecture. Concentrated buying occurred when more than one company competed for cotton but where one company purchased more than 50% of the total in that sub-prefecture. In most cases there were just two ginning companies that competed against each other to contract with growers. In many cases these companies operated in the same community. Competitive buying took place in sub-prefectures where many buyers vied for cotton but where no one company purchased 50% of the cotton produced there. Concentrated and competitive buying were pronounced in the most productive cotton growing areas (Figure 6). More than one ginning company bought cotton in each of these top-producing areas. In short, the market structure of Coˆte d’Ivoire’s cotton economy had evolved from

a national monopsony to a sub-national monopsony to a concentrated system in which two or more ginners competed for seed cotton. Cotton growers spoke positively of this growing competition in areas that were formerly controlled by just one company (Farmer interviews, Katiali, December 31, 2012). Competition took place not in the price of seed cotton but in the range and quality of services offered to farmers. For example, companies paid farmers within two to three weeks rather than three to four months after delivering their cotton to the gin. And some companies offered loans to their growers to send their children to school, to pay for medical expenses, and even to buy food during the hungry season prior to the next harvest. For example, COIC competed with Ivoire Coton by loaning farmers 200,000 CFAf to buy oxen in contrast to Ivoire Coton’s standard loan of 120,000 CFAf per animal (Farmer interview, Katiali, December 31, 2012). In summary, in contrast to Burkina Faso where the monopsonistic zoning system persists, the case of Coˆte d’Ivoire has evolved from a national to a sub-national monopsony to a more competitive albeit concentrated system in which companies vie against each other to sign up producers. As a result of this limited competition, farmers benefit from a wider range of higher quality services. The one arena in which they still strive to gain ground is in the annual setting of producer prices. In general, farmers view a single panterritorial and panseasonal price positively since it guarantees a market for their crop. What they seek is a higher share of the world market price (AFFICOT, personal communication, December 14, 2011). The question remains, is it possible for West Africa’s farmers

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Figure 6. Market structure in Coˆte d’Ivoire’s cotton growing areas, 2012–13. Source: ACE, 2012.

to obtain a fair price for their crop via the price setting mechanisms that currently operate in the region? 5. CAPTURING THE MARGINS VIA THE PRICE SETTING MECHANISM Two major goals of the 1990s cotton sector reforms were to increase cotton growers’ share of world market prices (social equity goal) and to reduce the chronic deficits of cotton companies (economic efficiency goal). Aid donors leveraged a two-pronged market-based approach to meet these equity and efficiency objectives: (1) privatization of the parastatal sector to introduce domestic price competition and, (2) the creation of a price setting mechanism that would align producer prices with world market prices. Aid-donor reform documents showed that producer prices were not linked to average world market prices but were administered prices based on a cotton company’s expected costs and world price forecasts. Producers typically received between 40% and 50% of world market prices (Pursell, 1998). The World Bank study argued that if producer prices had been aligned with world market prices between 1971–72 and 1996–97, then the average producer price in Coˆte d’Ivoire would have been 46% higher (Pursell, 1998). The report was highly critical of domestic pricing policies in francophone West Africa that were divorced from the market and which largely benefited cotton companies rather than producers. To reduce the amount of political bargaining and rent seeking opportunities, the report recommended aligning

“administered prices” with real world market prices. The price setting mechanism introduced into Coˆte d’Ivoire in the late 1990s and early 2000s aimed to make such alignments (Comite´ tripartite, 1999). To make the process transparent and credible to key players in the value chain, aid donors supported the creation of interprofessional organizations comprised of cotton company and producer representatives. Burkina Faso’s interprofessional association (AICB) meets annually to set producer prices and to negotiate other industry-wide agreements. Coˆte d’Ivoire’s association, Intercoton, is a similar umbrella organization that brings producers and ginning companies together annually to hammer out agreements. Similar organizations exist in Mali and Cameroon (Baffes, Tschirley, & Gergely, 2009). The most contentious meetings revolve around fixing the producer price for cotton. The pricing mechanisms for Coˆte d’Ivoire and Burkina Faso are long and complex documents that are not easy to comprehend (COWI, 2009; Estur et al., 2011). They are viewed as “the world’s most elaborate” pricing systems that are “mastered by only a small number of actors” (Estur et al., 2011, 2). Even the authors of the documents note that producers and their constituent organizations “have little understanding” of them (COWI, 2009, p. 77). In their presentation of the Coˆte d’Ivoire mechanism, its authors admit that “ginning companies have played a preponderant role in their implementation” (COWI, 2009, p. 77). This difference in the capacity of producers and cotton companies to understand and thus implement the price setting mechanism has skewed power relations in favor of cotton companies both prior to and during actual price negotiations.

CAPTURING THE MARGINS: WORLD MARKET PRICES AND COTTON FARMER INCOMES IN WEST AFRICA

A cadre of French consultants are responsible for writing the pricing mechanisms currently used in both countries. These experts on francophone West Africa’s cotton economies are all industry insiders. They have worked for either CFDT and/or France’s foreign aid agency, the French Development Agency, which has financed cotton programs in France’s former colonies for decades (Alliot, 1999; Vinay, 1999). The revolving door nature of their employment history is important to understanding the perpetuation of the CFDT system 50 years after political independence. The French model of a large, vertically integrated organization embedded in a semi-public institution characterizes the cotton and cultural economies of West Africa (Kaminski, Headey, & Tanugy, 2010). Cotton company employees, government civil servants, and cotton growers are all accustomed to the filie`re model (Italtrend Spa, 2006). They are habituated to its institutions and practices, which they reproduce in their everyday behavior. A panterritorial pricing policy is one such practice. In the past, the producer price was unilaterally set by cotton companies and government marketing boards. Today, this price is negotiated annually between cotton companies and growers according to a formula that considers a host of production and market variables. It is this pricing mechanism that largely determines the share of the world market price that cotton growers and companies will receive. 14 A closer look at the price setting formulas of Burkina Faso and Coˆte d’Ivoire reveals how this process works. (a) Burkina Faso’s price setting mechanism Burkina Faso’s seed cotton price setting formula is called the Smoothing Mechanism (le me´canisme de lissage). It was crafted in 2006 by French consultants with the support of the French Development Agency (Gergely, Bioche, & Zanfongnon, 2009). The formula is applied each year by the cotton sector management committee of Burkina’s interprofessional association (AICB). This committee, which is comprised of both farmer and cotton company association representatives, is required to announce the producer price for seed cotton by April 15 (AFLBF, 2008). Up until March 2011, the seed cotton price was determined on the basis of six parameters: (1) a forecast price for cotton fiber based on a five-year average of the Cotlook A index. This average was composed of daily averages for the past two years, the current year, and previsions for the next 2 years; (2) the average US$-euro exchange rate for the past 2 years; (3) a floor price for seed cotton, which was calculated as 95% of the forecast price multiplied by an average 42% ginning rate and 60% share of the value of the world market price; (4) a supplementary payment if the actual world price (Cotlook A) was more than 1% higher than the forecast price; (5) the actual world price based on the average Cotlook A quote for the 12 month period preceding the month of April to determine any supplementary payment; and (6) the reserve level of the smoothing fund. The aim of the smoothing fund is to guarantee the floor level price for seed cotton. If the world market price drops more than 5% below the forecast price, cotton companies are compensated for the costs of maintaining the floor price. When the world price is higher than the forecast price, a percentage of this gain is deposited in the smoothing fund; the residual is distributed to producers (60%) and cotton companies (40%). In summary, farmers can potentially receive two payments: a floor price payment after they sell their seed cotton and a supplementary payment. The latter is conditional on the actual world price being higher than the forecast price and the reserve level of the smoothing fund. 15

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In the spring of 2011, Burkina’s cotton farmers were poised to receive a hefty supplementary payment for the 2010–11 season. World market prices reached record levels that year which resulted in a significant difference between the forecast price and the actual world price. But the supplementary payment provision in the smoothing mechanism was not applied as anticipated. To the great detriment of farmers, AICB had amended the price setting mechanism in March 2011 at the peak of the cotton boom (Simpson & Katz, 2011). Based on an industry friendly consultant report (Estur et al., 2011), AICB changed the methods for calculating the forecast price, the world market price, the exchange rate, and supplementary payments. The biggest change concerned the determination of the world market price (Cotlook A). Rather than calculating the Cotlook A average for the previous (booming) 12 months to determine the actual world price, the new formula eliminated those months when cotton companies sold less than 1% of total production (Estur et al., 2011, p. 25). That meant that some of the highest world price months were not included in this critical calculation. This resulted in a lower world market price on which supplementary payments were calculated, thus depressing farmer incomes. Farmers were now compensating cotton companies for their failure to sell cotton during those months when market prices were high. Farmer incomes were further eroded by changes made in the formula for calculating supplementary payments. In the amended mechanism, if national production was less than 75% of the ginning capacity (600,000 T), farmers were to receive just 75% of their share of the supplementary payment. The remaining 25% was to be used “to compensate for the under-utilization of the productive capacity of the cotton companies” (Estur et al., 2011, p. 26). Since total cotton production in 2010–11 was under 450,000 T, the already diminished producer supplementary payment was further reduced. Farmers were effectively subsidizing an inefficient and over-extended cotton industry. Simpson and Katz estimated that farmer payments were reduced by 39% in 2010–11 as a result of the formula changes (Simpson & Katz, 2011). They also determined that the 2011–12 floor price for seed cotton had been lowered as a result of changes made to calculating the forecast price. The new forecasting method used a three year rather than a five year average and eliminated the months in the previous 14 months when cotton companies sold less than 1% of total production. The ire of protesting cotton farmers was understandable. They had been deprived of their rightful earnings by the amended price setting mechanism. They were particularly angry at their union representatives on the cotton sector management committee for not defending their interests. Their sense of betrayal was not defused by UNPCB President Karim Traore´’s declaration that the 2011–12 floor price for seed cotton was the highest ever negotiated by cotton growers. Farmers knew that this price should have been much higher; they also knew that their supplementary payment for the 2010–11 season had been significantly reduced to the benefit of cotton companies. (b) Coˆte d’Ivoire’s price setting mechanism With funding from the European Union, French consultants crafted a new price setting mechanism for Coˆte d’Ivoire in 2009. The mechanism, popularly known as COWI, is a 175page document that provides sector actors with a formula for calculating the producer price for a kilogram of seed cotton. The COWI formula is: PICG = A  PCF  T$  RCF  C, in which

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PICG = the producer price A = the share of cotton revenues going to producers (a percent) PCF = the anticipated price for a kilogram of lint cotton (Cotlook A index) T$ = the average Euro to US$ exchange rate published for the month of March RCF = the anticipated average gin rate, hypothesized to be 43.3%; C = a “prudence coefficient” estimated at 90%. A critical but little appreciated component of this formula is variable A: the share of cotton revenues received by producers. The consultants calculated this share with reference to cotton company declarations of the costs of running a cotton gin at full capacity (50,000 tons). These operating costs, which are widely viewed as “excessively high by international standards” (Baffes, 2011, p. 1549), cover the amortization and fixed and variable capital for ginning; the amortization, financial and fixed costs of the company’s headquarters; and the costs for transporting cotton to the port for export. Cotton company officials argue that these costs have to be considered in producer price negotiations if cotton companies are to remain solvent. The consultants viewed these declarations as legitimate and a key to maintaining the “equilibrium” of the filie`re and its competitiveness in international markets. In the COWI formula, the operating expenses of cotton companies are set with reference to a projected harvest of 350,000 tons of cotton. At this level, producers receive 63.3% of estimated cotton revenues and cotton companies receive 36.7%. If production falls below the 350,000-ton threshold, the producers’ share drops and the cotton companies’ share increases. For example, if total seed cotton production amounts to 220,000 tons, producers receive just 56.2% of the estimated net revenues while the cotton companies’ share rises to 43.8%. Cotton companies argue that this higher share is reasonable in light of their higher operating expenses for running gins below capacity. This revenue distribution component of the mechanism is biased toward cotton companies in at least two ways. First, it is difficult to know the actual as opposed to the “expected” operating expenses of cotton companies. There is much room here for exaggerating costs to keep producer prices low and cotton company profits high (Bassett, 2008; Larsen, 2003; Pursell, 1998). Second, linking the distribution of revenues to a base of 350,000 tons means that cotton growers subsidize cotton companies when seed cotton production drops below this threshold. The 350,000-ton target is an optimal as opposed to a realistic figure. In the twenty-year period 1991–2010, national cotton production reached this level just four times. It was below 200,000 tons for the period 2007-08 – 2010-11. When farmers deliver 200,000 tons, their share of estimated revenues drops to 54.3%. The share that cotton companies receive correspondingly increases to 45.7%. That is, the formula remunerates cotton companies for their fixed costs when production drops below 350,000 tons. There is no incentive for companies to adjust their ginning capacities to realistic levels and operate more efficiently. Rather, it is the producers who must reduce their share of revenues to save the ginning companies. In COWI, this hidden subsidy is described as “key” to ensuring the “equilibrium of the filie`re” (COWI, 2009, p. 100). 16 In short, before entering the cotton price negotiating room, cotton companies have already negotiated a disproportionate share of cotton sector revenues. Once inside the negotiating room, they manage to accumulate an even larger portion.

(c) The 2011–12 producer price negotiations Details of the cotton price negotiations that took place in Coˆte d’Ivoire in late April and early May 2011 illustrate the power of cotton companies to implement the price setting mechanism to their advantage. My focus on these discussions also illuminates the importance of the national and regional arenas as key sites of price transmission. Producer prices for seed cotton are negotiated by six representatives of the cotton growers’ organization (AFFICOT-CI) and six representatives of the cotton companies’ association (APROCOT-CI). 17 These 12 people serve on the Board of Directors of Intercoton. Their discussions are moderated by the President of Intercoton who also chairs the Board of Directors. The two groups met on four occasions between April 28 and May 27, 2011 to discuss the producer price for 2011–2012. The following account of the meetings was outlined in the industry’s newsletter, Le Coton (Intercoton, 2011b) and conveyed to me by representatives of the cotton companies, producers, and Ministry of Agriculture who were present at the negotiations. At the first meeting held in Yamoussoukro on April 27–28, 2011, the growers presented their price of 331 CFAf for a kilogram of seed cotton based on their application of the COWI formula. 18 Cotton company representatives responded that they could not sell Ivorian cotton on world markets at this price (Intercoton, 2011b). Of course, no one other than the cotton companies themselves knows the price at which they sell cotton on world markets. 19 In the absence of this privileged information, cotton producers found it difficult to counter this argument. Cotton company representatives argued that they were professionals who knew cotton markets better than farmers. They also noted that producer prices in neighboring countries were much lower and urged producers to be “realistic.” Finally, they argued that the risk of market prices falling was real and this prospect had to be taken into account in setting the price. They offered a price of 250 CFAf/kg that was derived from a projected cotton price of $1.10 per lb of cotton lint and an exchange rate of 442 CFAf/US dollar. These key figures were not obtained from the sources prescribed by the COWI mechanism. The producers’ negotiators were perplexed. The cotton companies were negotiating outside the parameters of COWI. But grower representatives did not confront the cotton companies on this issue. Instead, they argued that it was not fair to compare Ivorian cotton prices with those in neighboring countries. In Burkina Faso, farmers receive a supplementary payment at the end of the marketing year if world market prices are higher than the Cotlook A index, the world market reference price in the COWI formula. This was not the case in Coˆte d’Ivoire. Growers further stated that the pace of cotton sector reforms was more advanced in Coˆte d’Ivoire, which should result in lower operating expenses for cotton companies. The growers’ negotiators also seemed to be in a hurry to report a quick victory to their membership. The producer price for 2010–11 had been 200 CFAf/kg of seed cotton. The 250 CFAf/kg price offered by cotton companies was, relatively speaking, a significant improvement. But it was not a fair price in light of the booming cotton market (Figure 1). To move the discussion closer to their proposed price, the producers’ representatives dropped their offer to 300 CFAf/kg within the first hour of discussion. But the cotton companies did not budge. They said that they had to meet with their members to discuss any price higher than 250 CFAf/kg. The cotton producers said that they had to do the same, and the meetings ended. The second meeting took place on May 10 in Abidjan at Intercoton. Cotton producers said they would go down only

CAPTURING THE MARGINS: WORLD MARKET PRICES AND COTTON FARMER INCOMES IN WEST AFRICA

5 CFAf to 295 CFAf/kg. Cotton companies refused to buy at this price. They again brought up the much lower prices in neighboring countries. The meeting broke up without any agreement. The third meeting took place on May 17 in Abidjan at the offices of the Ministry of Agriculture. The cotton companies showed themselves to be shrewd negotiators. They started the meeting by telling the cotton grower representatives that, “We are listening,” which was an invitation to the growers to make the first price compromise. The less skillful growers revealed their position during the first 5 minutes of the meeting. They said that their membership would not allow them to go below 270 CFAf/kg. Agricultural Ministry representatives attempted to persuade the cotton companies to buy at this price. But they refused, insisting that this was an impossible price, and that the highest price they could pay was 260 CFAf/kg. The meetings ended again without any agreement. The fourth meeting held on May 27 at Intercoton was long and difficult. The cotton companies repeatedly referred to prices in neighboring countries as indicative of the range in which they could negotiate. At the end of the day, the cotton companies agreed to increase their offer by 5 CFAf kg. The two parties finally agreed to a price of 265 CFAf/kg for 1st grade seed cotton, and 240 CFAf/kg for 2nd grade cotton. 6. DISCUSSION I report the details of Coˆte d’Ivoire’s price setting meetings to make five points. First and foremost, they illustrate the power of cotton companies to manipulate the price setting mechanism to their advantage. They did so by accepting certain COWI parameters and rejecting others. Cotton companies accepted the variable that gives them a more than generous share of estimated cotton revenues (45.7%, based on an expected 200,000 tons of seed cotton). They rejected the variables that would have increased the producer price (the ICAC forecast cotton price and the Central Bank of West African States (BCEAO) average exchange rate). As a result of this selective application of the COWI formula, the cotton companies’ share of the world market price came to 55.4%. 20 This win–win outcome for cotton companies (i.e., a high share of estimated cotton revenues and a high share of the world market price due to a relatively low producer price) was a lose-lose outcome for producers. Their COWIgenerated share of cotton revenues was low (54.3%, based on an expected 200,000 tons of seed cotton) and their anticipated share of the Cotlook A price for 2011–12 came to just 44.6%, a level not seen since the early 1990s. 21 An important tactic in the cotton companies’ negotiating strategy was to align the Ivorian producer price with those already negotiated in neighboring countries. This use of regional scale prices to influence national level price negotiations reveals the cross border reach and interests of cotton companies like Paul Reinhart AG, a major shareholder of both Ivoire Coton and Fasocoton. If Ivoire Coton growers received 331 CFAf/kg this year and Fasocoton growers received 245 CFAf/kg, Reinhart would likely be pressured by Burkina’s cotton growers to give a large supplementary payment at the end of the season. To maximize its profits in both countries, Reinhart had to keep a lid on the Ivorian producer price. My second point is that the producers’ relatively low share (44.6%) of world market prices is likely overestimated because cotton companies are probably receiving a higher price for lint cotton than suggested by the reference Cotlook A price. If they

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do receive a higher price, the producers’ percentage would be lower since the producer price does not change once it is set. 22 We have good reason to believe that cotton companies sell above the world reference price. First, the Cotlook A quote undervalues West African cotton. The index is set by averaging the five lowest quotations given by traders consulted by Cotlook Ltd. for a basket of 19 types of cotton “on the assumption that these are likely to be the cottons most frequently traded on the day in question” (www.cotlook.com). Fok argues that the cotton quality grades upon which the index is based are inferior to West African cotton (Fok, 2005). West African cotton should and does sell for a higher price on world markets given its superior quality (ACE, 2011, Bassett, 2008, Estur et al., 2011). Second, there is a conflict of interest inherent in the quote since traders have a stake in buying cotton at a low price. They are likely to give a relatively conservative estimate (Fok, 2005). Third, there is also the prospect of collusion between cotton companies and cotton traders that complicates the politics of price formation in West Africa’s cotton economies. Ivoire Coton and Fasocoton sell cotton to Paul Reinhart AG, a major shareholder in both companies and one of the world’s largest cotton traders. We need to see Reinhart’s sales contracts to say anything conclusive, but it is possible that the trading company buys West African cotton at a relatively low price (at or below Cotlook A), which would allow it to turn around and sell its high quality cotton for a higher price. The problem is that “sales between the monopolies and their trader-owners are opaque” (Simpson & Katz, 2011). An unpublished FAO study of Burkina Faso’s cotton sector is not encouraging. It notes that “signals of collusion are quite apparent” between the cotton companies and their traderowners (Bellu` & Tortora, 2010). Although we do not know whether cotton companies are selling above or below the world market (Cotlook A) price, we do know that cotton farmers stand to be the biggest losers from such “intra-firm exchanges” (OECD, 2006, p. 94). The cotton selling activities of the Socie´te´ d’Exploitation Cotonnie`re de Ouangolo (SECO), one of the new ginning companies operating in Coˆte d’Ivoire, raises questions about whether cotton companies are actually seeking the highest prices for cotton lint on world markets. SECO is owned by OLAM International, one of the world’s largest commodity traders. It acquired the Ouangolodougou cotton gin in 2008 when the assets of LCCI were liquidated following its bankruptcy. In 2010–11, SECO ginned 14,765 tons of seed cotton to produce 6,470 tons of cotton lint. It sold all of its cotton to OLAM’s cotton trading branch. The average sale price (FOB) of its sales amounted to 737 FCAf/kg of lint. This was 31.6% below the average sale price (970 FCAf/ kg) of cotton lint exported by all of Coˆte d’Ivoire’s cotton ginning companies that year (ACE, 2011, p 48). The quality of SECO’s cotton lint was above average so its lower than average sale price does not reflect lower quality cotton. 23 It is quite possible that OLAM’s cotton traders sold SECO’s cotton on world markets for a much higher price. At the very least, this example of intra-firm trading raises questions about the good faith efforts of cotton company representatives during price setting negotiations when they tell producers that their proposals are unrealistic given “world market prices.” A fourth observation is that cotton companies operate like a cartel. There is no price competition among them; they speak with one voice at the cotton price negotiation meetings. It is not possible for producers to choose the most efficient and highest paying ginning company. Finally, and most troublesome for cotton growers, their representatives did not negotiate well. Despite their straightforward

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application of the COWI mechanism, the producers’ representatives did not insist that cotton companies play by the rules of the game (even if they were rigged in favor of cotton companies). They were not in a position of strength to make them accept the results of the COWI method. The producers’ representatives lacked access to market information. As one grower negotiator summed it up: “We do not know the market, we don’t see the [cotton market] indicators. We are blind” (AFFICOT, personal communication, December 14, 2011). A second weakness that prevented producers from insisting on a higher price stemmed from the disarray of the cooperative movement. The producers’ negotiators could not count on its membership to organize a market boycott to leverage their negotiating position. In contrast to the early 1990s when Coˆte d’Ivoire’s cotton cooperatives were well organized and mounted a market boycott, the cooperative movement is more fractured today. In the 1990s just one cooperative (URECOSCI) represented close to 80% of the country’s cotton farmers. Ten years later there were more than 200 cooperatives, none of which could be truly described as national (Gergely et al., 2009). Cotton companies have encouraged the proliferation of farmer organizations as a means to weaken the cooperative movement. A divided cooperative movement serves cotton company interests, especially during annual producer price setting negotiations. Hobbled by these weaknesses, the producers’ representatives were unable to counter the cotton companies’ bargaining point that they could not find a buyer at the price proposed by farmers. This inequality in access to market information combined with the weak organization of producers and the lack of competition among cotton companies structured the bargaining game in favor of cotton companies. In summary, the power relations displayed at the price setting meetings revealed an uneven playing field on which cotton companies have the greatest influence in shaping producer prices and incomes in the cotton fields of West Africa. 7. CONCLUSION This paper’s focus on the oligopsonistic structure of West Africa’s cotton economies and the inner workings of its price setting mechanisms emphasizes the national and regional level contexts in which cotton growers are currently struggling to work their way out of poverty. This attention to the national scale contrasts with the international focus of NGO fair trade campaigns. These campaigns address important power relationships, institutions, and practices operating at the global scale that (re)produce poverty in places like the West African savanna region. Cotton growers and their governments are aware of these forces and inequities and have pursued political and legal action, notably at the WTO annual meetings and WTO’s Dispute Settlement Body (Baffes, 2011; Goreux, 2003). What this paper highlights are the simultaneous and equally important struggles taking place within individual countries where producers seek to advance and defend their interests (Delpeuch, 2011). The producer price setting meetings are perhaps the most important arena in which cotton growers strive to get their fair share of cotton revenues. The 2011–12 negotiations did not go as well as they should have. In this conclusion, I summarize what I believe are some of the major challenges that cotton growers face in the region and propose some new research questions. One set of challenges concerns cotton sector reforms. In September 2013 Coˆte d’Ivoire’s Minister of Agriculture organized a meeting in the capital of Yamoussoukro to validate

documents that would operationalize reforms to the cotton and cashew sectors. The reforms are not promising for producers. They promote a status quo ante set of actions that furthers the interests of cotton ginning companies over those of growers. Rather than jettison the highly flawed price setting mechanism, the reform simply tweaks it by recommending new parameters for the formula and by (re)instituting a supplementary payment system similar to Burkina Faso’s. The proposed new pricing system would guarantee producers 60% of the world market price. But this guarantee assumes that producers and ginning companies agree on the “world market price.” The 2011–12 price setting negotiations in Burkina Faso and Coˆte d’Ivoire and the practice of intra-firm trading demonstrate the importance of power relations and privileged information in determining “world market prices.” In light of these inequalities of knowledge and power, the 60% guarantee does not necessarily mean that producers will be receiving a larger share of the profit margins. More comparative studies are needed on the construction of price setting mechanisms and their implementation in other West and Central African countries (Baffes et al., 2009). The Coˆte d’Ivoire and Burkina Faso cases reveal the presence of “traveling technocrats” operating in transnational policy networks who shape national agricultural policies (Larner & Laurie, 2010; Stone, 2008). 24 We need to know more about the social, political, and historical origins of these actors, their networks, and their practices. Figures 1 and 2 suggest these networks, whose origins date from the colonial era, exert considerable influence on market organization and price setting across the region. Future research could also illuminate the meanings and measures of “world market prices.” There is considerable ambiguity on this topic. Sale prices are privileged information for cotton companies. The proxy indicator, the Cotlook A index, undervalues West African cotton. Sale prices are further complicated by suspected collusion between cotton companies and their trading affiliates. And more information is needed on the quality of the export price data collected by auditing firms at ports (ACE, 2011). Burkina Faso’s amended smoothing mechanism redefined “world market prices” to those months in which cotton companies sold more than 1% of total production. The most regressive feature of the cotton sector reform in Coˆte d’Ivoire is the return to cotton zoning. The reform calls for the delimitation of the cotton growing areas into zones in which ginning companies have the exclusive right to purchase cotton for a five-year period, subject to annual evaluation. This reinforcement of the oligopsonistic sector was rejected by producers. While the Minister of Agriculture led discussions over the implementation of the reform in Yamoussoukro, cotton growers met in Korhogo to denounce the zoning plan (Ouattara, 2013). Producers called for a more competitive market structure in which they could choose the company with whom they wished to work. They cited the benefits of the competition in services that had come to characterize the sector over the past few years such as prompt payments and accurate grading of seed cotton. Ouattara Gnonzie´, a cotton grower from the Nielle´ region, likened zoning to forced marriage: “The government has prohibited forced marriage where each son and daughter is now free to join in a conjugal union of their choosing so what the devil is it doing imposing ginning companies on us?” (Ouattara, 2013). The producers presented a letter to the Prefect of Korhogo, the government’s chief representative in the region, so that he would transmit their grievances to “the country’s decision makers.” They then threatened to organize protest marches in cities across the cotton growing areas to convey their discontent with the return to cotton zoning.

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Future research should look outside the box of cotton company zoning to examine producer initiatives to restructure market organization. Coˆte d’Ivoire farmers have proposed an alternative zoning “in which cooperatives will contract with one or more cotton companies based on the spatial organization of producer cooperatives” (Intercoton, personal communication, January 5, 2013). For example, 10 to 40 contiguous village-level cooperatives could group together and negotiate contracts with cotton companies to obtain inputs and to market their cotton. The goal would be to stimulate competition among companies to provide services that they otherwise would not provide if they controlled their own zone. The World Bank currently supports this alternative zoning scheme (World Bank, Abidjan, personal communication, January 8, 2013). Current thinking is that it will take 3 years for producers to rebuild the cooperative movement to a level that would enable them to effectively restructure the market in this way. The oligopsonistic structure of West Africa’s cotton economies clearly favors cotton companies over producers.

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The violent protests in Burkina Faso over producer prices and the discontent of Coˆte d’Ivoire farmers over cotton zoning seek to alter the unlevel playing field that characterize their cotton sectors. Farmers in both countries are not demanding that the price setting mechanism be abandoned (AFFICOT, personal communication, December 14, 2012; Intercoton, personal communication, January 5, 2013). They seek a larger share of the revenues generated in the cotton economy, a goal that dates from the colonial era (Bassett, 2001). The price setting mechanisms and monopsonistic zoning might be viewed as “second best” solutions to complex agricultural development problems (Serra, 2012). But this perspective should not underestimate the desire of Africa’s smallholders for more power and knowledge at the negotiating table and for restructured markets in which they determine with whom they wish to purchase agro-inputs and to sell their cotton. The combination of farmer power and market power could make a big difference in improving farmer incomes and livelihoods in West Africa’s cotton economies.

NOTES 1. Cotton is priced in world markets in US dollars for a pound of cotton lint. After ginning (43% outturn rate), a kilogram of seed cotton produces 14.82 oz of cotton lint. Thus, farmers received 16.53 CFAf per ounce of cotton lint, or 264.48 CFAf per pound. At an exchange rate of 500 CFAf/ US$, farmers received about 53¢ per pound of cotton lint, or a quarter of the world price in April 2011. 2. Cottonseed is typically processed into an edible oil and livestock feed. 3. An estimated 277,000 households grow cotton in Burkina Faso (World Bank, 2010). In Coˆte d’Ivoire there are some 180,000 cottongrowing households (COWI, 2009). The incomes of millions of people in both countries are directly related to cotton growing (Gergely et al., 2009). 4. One local leader of the boycott stated to the press: “We have the impression that the UNPCB, instead of defending the interests of producers, is an accomplice of Sofitex,” referring to the largest of the three cotton companies operating in Burkina Faso (Ouedraogo, 2011). 5. There were multiple causes of the price spike (ICAC, 2011). Among the most important was high demand for cotton in a context of low world stocks. The US accounts for 40% of world cotton exports (https:// www.icac.org/econ_stats/country_facts/e_usa.pdf), accessed on December 25, 2013.Between 2004–07 and 2008–11 the harvested cotton area in the US dropped by 30% (USDA, 2010). This decline was attributed in large part to cotton growers switching to more lucrative crops such as corn and soybeans (Lea, 2011). 6. CFA refers to the Communaute´ Financie`re Africaine (African Financial Community). The West African CFA franc is the common currency in seven former French colonies (Benin, Burkina Faso, Coˆte d’Ivoire, Mali, Niger, Senegal, and Togo) and the former Portugese colony of Guinea-Bissau. The exchange rate of the euro to the CFA franc is currently set at 655.957 CFA francs for one euro. 7. The Cotlook A price in this graph is the average quote for a kilogram of cotton lint for the months of December–March in US$/kilogram. This is the period when most cotton is ginned in the WCA countries. The producer price refers to the annual price for a kilogram of first grade seed cotton which I converted to a kilogram of cotton lint using the average ginning rate (0.43) and the CFAf-US$ exchange rate for the December– March period.

8. The price stabilization fund was called “la Caisse de stabilization des prix du coton en AOF.” 9. La caisse de stabilization et de soutien des prix et des productions agricoles (CSSPPA or Caistab). 10. La Compagnie ivoirienne pour le de´veloppement des fibers textiles. 11. CFDT withdrew from the partnership in protest over the privatization process. 12. COIC is owned by Kone´ Daouda Soukpafolo, an entrepreneur based in Korhogo. The company is associated with a federation of producer cooperatives known as Yebe Wognon. 13. Cotton growers can also sell their cotton (at the official price) to a producer organization that has provided them with inputs. These organizations can, in turn, sell their seed cotton to any ginning company (Intercoton, 2011a,b). 14. The pricing mechanism is not the only factor producing a disconnect between national and world market prices. Kaminski et al., argue that “political interests,” specifically “electoral politics,” exert a strong influence on price policies in Burkina Faso (Kaminiski et al., 2010, p. 1472). Baffes et al. (2009) similarly argue that “political factors and the strength of farmer organizations” can influence the level of producer prices (Baffes et al., 2009, p. 65). 15. A third payment called the “ristourne” is also possible when the world market price is higher than the forecast price. The ristourne is calculated as the difference between the ceiling and floor prices in the socalled “tunnel” in which the forecast price is located. See Bayoulou (2010) for a graphic illustration of this tunnel. 16. The authors of COWI simply recommend that “the ginning companies must, as much as possible, adapt their operations to projected production levels so that producers do not bear the increased costs associated with the under utilization of existing capacity” (COWI, 2009, 105). But the price mechanism does not impose any financial costs on cotton companies if they fail to operate more efficiently.

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17. AFFICOT-CI refers to l’Association des Faitie`res de la Filie`re Coton de Coˆte d’Ivoire. APROCOT-CI stands for l’Association Professionnelle des Socie´te´s Cotonnie`res de Coˆte d’Ivoire. 18. The two most important elements that affected their calculation were (1) the projected market price of cotton for 2011–12 and (2) the average euro–US dollar exchange rate for the month of March 2011. The COWI mechanism uses the Cotlook A index published by the International Cotton Advisory Committee on April 1 to predict the market price. The forecast price was $1.38 for a pound of cotton lint (ICAC, 2011, 2). The exchange rate is calculated from the West African Central Bank’s daily exchange rates for the month of March. The average for that month equaled 465.75 CFAf/US dollar. The growers’ representatives used these key figures to calculate their price, after adding the anticipated value of cotton seeds (80 CFAf/kg) and subtracting the cotton companies anticipated costs, a few voluntary deductions, and the cotton companies’ share of estimated revenues (45.7%) based on a projected production level of 200,000 tons. 19. The refusal of cotton companies to divulge the prices they receive on world markets is the principal reason why the proxy measure of the Cotlook A index is used in the COWI formula. 20. The producer’s share of the world market price is based on two prices typically expressed in US dollars for a pound of cotton lint. These figures are converted here to CFAf/kg of lint using Intercoton’s conversion

coefficients. The first is the producer price (610 CFAf/kg of lint), the second (1371 CFAf/kg of lint) is the forecast Cotlook A (Far East) index published in April by the International Cotton Advisory Committee (ICAC). The producer price is simply divided by the Cotlook A quote to obtain the producers share: 612/1371 = 0.4463 or 44.6%. 21. This share is below the medium-term average calculated by COWI for the period 1994–2008, which amounted to 48.7% (COWI, 2009, 82). Figure 1 shows that the producer’s share of the Cotlook A index amounted to 53% for 2011–12 when one averages the A index price for the months of December–March. When we use the COWI formula’s April 2011 reference price, the producer’s share drops to 44.6%.

22. Unlike the producer price mechanism in Burkina Faso, COWI has no provision for a “supplementary payment” if world market prices significantly increase over the course of the season.

23. The proportion of SECO’s cotton lint exports (36%) that were classed among the highest grades (MIKO, MANBO/S, MANBO/N) was similar to that of CIDT (31%), Ivoire Coton (42%), and COIC (34%) (ACE, 2011).

24. Thanks to Dr. Rachel Schurman for directing me to this literature.

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