WOr [DBr3/K II N 'MrLfj' VI x -

Cott'onr Production Prospects Public Disclosure Authorized for the Decade to 2005 A Global Overview

Hamdy M. Eisa, Shawki Barghouti, Fred Gillham, and M. Tawhid Al-Saffy Public Disclosure Authorized Public Disclosure Authorized ~jj4

i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~z Public Disclosure Authorized

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No. 163 Shilling, editor, Beyond SyndicatedLoans: Sources of Creditfor DevelopingCountries No. 164 Schwartzand Kampen,Agricultitral Extensioni inr East Africa No. 165 Kellaghanand Greaney, UsingExaminations to lmproveEducation: A Study in FozaricenAfrican Counttrics No. 166 Ahmad and Kutcher, IrrigationPlanning with EnivironmlnentalConisiderations: A CaseStudy of Pakistan'sIndus Basin No. 167 Liese,Sachdeva, and Cochrane, Organizingand Mataging Tropical Disease Conttrol Progranms: CaseStudies No. 168 Barlow, McNelis, and Derrick, SolarPumiping: An Introductionand Updatcon the Tecinology, Performnnce,Costs and Economics No. 169 Westoff, Age at Marriage,Age at First Birth,and Fertility in Africa No. 170 Sung and Troia, Developmenjtsin Debt ConversionPrograms and ConversionActivities No. 171 Brown and Nooter, SuccessfuiSmall-Scale Irrigation in the Sahel No. 172 Thomas and Shaw, IssUesin the Developmentof Multigrade Schools No. 173 Byrnes, Water UsersAssociation in World Bank-Assisted IrrigationProjects in Pakistan No. 174 Constant and Sheldrick,World Nitrogen Survey No. 175 Le Moigneand others, editors,Country Experiences twith Water Resources Management: Economic, Institutional,Technological and EnvironmentalIssues No. 176 TheWorld Bank/FAO/UNIDO/industry FertilizerWorking Group, Worldand Regional Supply anidDemand BalanscesforNitrogen, Phosphate, and Potash,1990/92-1996197 No. 177 Adams, 7he World Bank's Treatmentof Employment and LaborMarket Issues No. 178 Le Moigne, Barghouti, and Garbus, editors, Developingand Improving Irrigationand Drainage Systems: SelectedPapersffrom World Bank Scminars No. 179 Speirs and Olsen, IndigenousIntegrated Farming Systems in tite Sahel No. 180 Barghouti, Garbus, and Umali, editors, Trends in Agricultural DiversiJication:Regional Perspectives No. 181 Mining Unit,Industry and EnergyDivision, Strategyfor Africani Mining No. 182 Land Resources Unit, Asia Technical Department, Strategyfor ForestSector Developmentin Asia No. 183 Najera, Liese, and Hanmmer,Malaria: New Patternsand Perspectives No. 184 Crosson and Anderson, Resourcesand GlobalFood Prospects: Supply and Demandfor Cerealsto 2030 No. 185 Frederiksen, DroughitPlanning and Water EfficiencyInmplications in Water ResourcesManagement No. 186 Guislain, Divestiture of State Enterprises:An Overviewof the LegalFramework No. 187 De Geyndt, Zhao, and Liu, FromnBarefoot Doctor to VillageDoctor in Rural China No. 188 Silverman, Public Sector Decentralization:Economic Policy and SectorInvestment Programs No. 189 Frederick, BalancingWater Demandswith Supplies:77e Roleof Managementin a World of Increasing Scarcity No. 190 Mackilin,Agricultural Extension in India No. 191 Frederiksen,Water Resources Institutions; Some Princips andPractices No. 192 McMillan,Painter, and Scudder,Settlement and Developmnent in the RiverBlindness Control Zone No. 193 Braatz, ComservingBioogical Diversity A Strategyfor ProtectedAres in the Asia-PacificRegion No. 194 Saint, Universitiesin Africa:Strategiesfor Stabilization and Revitalization No. 195 Ochs and Bishay,Drainage Guidelines No. 196 Mabogunje, Perspectiveon UrbanLand and Land ManagementPolicies in Sub-SaharanAfrica No. 197 Zymelhnan, editor, Assessing EngineeringEducation in Sub-SaharanAfrica

(list continueson the insideback cover) WORLDBANK TECHNICAL PAPER NUMBER 231

Cotton Production Prospects for the Decade to 2005 A Global Overview

Hamdy M. Eisa, Shawld Barghouti, Fred Gillham, and M. Tawhid Al-Saffy

The WorldBank Washigton, D.C. Copyright © 1994 The Intemational Bankfor Reconstruction and Development/THEWORLD BANK 1818H Street, N.W. Washington,D.C. 20433, U.S.A.

ARrights reserved Manufactured in the United States of America Firstprinting February1994

TechnicalPapers are published to communicatethe results of the Bank's work to the development community with the least possibledelay. The typescriptof this paper thereforehas not been prepared in accordancewith the procedures appropriate to formal printed texts, and the World Bankaccepts no responsibilityfor errors. Some sources cited in this paper may be infornal documents that are not readily available. The findings, interpretations,and conclusionsexpressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank,to its affiliatedorgaizations, or to members of its Board of ExecutiveDirectors or the countries they represent The World Bank does not guarantee the accuracyof the data included in this publication and acceptsno responsibilitywhatsoever for any consequenceof their use. The boundaries, colors,denominations, and oher informationshown on any map in this volume do not imply on the part of the World BankGroup any judgment on the legal status of any territory or the endorsement or acceptanceof such boundaries. The material in this publication is copyrighted.Requests for permissio to reproduce portions of it should be sent to the Officeof the Publisher at the address shown in the copyright notice above.The World Bank encourages dissemination of its work and will normally give permissio promptly and, when the reproduction is for noncommercialpurposes, without asking a fee.Permission to copy portions for classroomuse is granted through the Copyright ClearanceCenter, hInc,Suite 910,222Rosewood Drive, Danvers, Massachusetts01923, U.S.A. The complete backlist of publicationsfrom the World Bankis shown in the annual IndexofPuts, which contains an alphabetical title list (with fuUordering information)and indexes of subjects,authors, and countries and regions.The latest edition is availablefree of charge from the DistributionUnit, OffiCe of the Publisher,The World Bank, 1818H Street, N.W.,Washington, D.C 20433,USA, or from Publications,The World Bank 66, avenue d'Idna, 75116Paris, France.

ISSN:0253-7494

All of the authors are affiliatedwith the World Bank.At the time this paper was written, Hamdy Ml Eisa was principal agriculturalist in the AgriculturalTedcology and ServicesDivision of the Agriculture and Natural Reources Department He is curretly with SouthAsia-Cotmtry Department I in the World Bank Field Officein New Delhi, India. ShawWiBarshouti is division chief of the Agdcuhe Operations Divisionof South Asia-Country Department II Fred Giam and M. Tawhid Al-Saffyare consultants to AgriculturalTechnology and ServicesDivision of the Agrculture and Natual Resources Departnent. Library of Congress Cataloging-in-PublicationData

Cotton production prospects for the decade to 2005 : a global overview / Hamdy MNEisa ... [et aLl. p. cm. - (World Banktechnical paper, ISSN0253-7494 ; no. 231) Includes bibliographicalreferences. ISBN0-8213-2715-1 1. Cotton growing. 2. Cotton trade. L Eisa, Hamdy NL,1938- IL Series. HD90705.C74 1993 338.1'7351-dc2O 93-43822 CEP Contents

Introduction I

1 EconomicImportce of Cotton S 2 Stctr of the Cotton Industry 7 Distriution of CottonProduction Areas 7 CottonProduction Systems 7 Marketng Seedcottonand CottonLint 8

3 Cotton Policy 9 Intrduction and Couty Classification 9 Category1: United States,Turkey and Brazi 9 Category2: China, Centra Asia and Egypt 12 Category3: India and Pakistan 17 Sourcesof Information 19

4 Cotton Production 21 ConditionsRequired for Cotton Production 21 impactof Yield an WorldCotton Production 21 Production 21 Varieties 25 tegrted Pest Malagement (1PM) 26 Reserch 28 Economicsof Technology 32

3 Consumptiomand Production Outlook 35 Wodd ConsumptionProjections to 2005 36 Pice and Income ElasticitiesConained in the EmpiricalStudy 35 Wodd ProductionProjections to 2005 43 Price Projectio 46 EfficiencyFactos 47 ProductionProset and Rural Diversification 50

6 Conclusicns 53

Appendix I Regional Producdon and Consumpton Projectons 57

Appenicx I Country Coto Producon and COnS on Projecons 61

Appendix m U.S. Cotton Programs and Farm Policy 87

References 10S

Glossary 113 fli) Acknowledgments

Mhe auhors wish to thakthe follow people for their substantia conution to his publication HeshamulHuque asisted in Xh comilaion of basic toeical inomnation. M. ElN Th e. asdsted withthe chapteron Consumptionad ProductionOudooL Tom Bdliw the outside reviewe who asited with the Production and Conumpton projection, Poliy secton ad revieweddw entiredocumenL Lisa Garbusedited an ealy draft. Eric Meyer edked nd prepaed the final docume.

(IV) Foreword

Cottonplays a vital multisectoralrole in the economiesof many developingcounies. It is a major foreign exchangeearner and a valuablecasb crop for mny smallholderfarmers, thus conuting to efforts to increase farmer in"omes. Cotton is a major source of fiber for the textile ad appar industries.as well as a valuablesource of protein for food and animalfeed.

Over the past decades, performancepaterns amongdfferent countries' cotton indusies have divergedwidely. Someindustries have experienceddecline or stagnation,whereas athes have expaded rapidly. Globally,cotton industries are facingseveral strategicchaUenges that affectnot onilycotos competitivenesswith man-made fibers in the textile industry, but also its profitabilityand the sustainabilityof production,even in countrieswith a dynamiccotton industry. A majorconcern in any countriesis that as populaon pressuresnecessitate increased food produon, cottongrowng is comng under increasingpressure as it competeswith food crops. The environmen implicationsof pesticide use in cottonproduction are alsogaining in importance,and seriousatempts to implementIntegrated Pest Management (IPM) strategies need to be accorded strong support in research and exesion programs. Furthermore,there are concernsover the imnpactof the introductionof open marketeconomies and the removalof subsidieson futurecotton production in countriesin whichproducion has been conolled by the govement. With consumptionincreasing steadily, and new acreagefor productionconstained, any expansionin productionis likelyto comefrom increasedyields rather thanfrom increasedareas devoted to cottongrowing. This will requirethe introductionof new technologiesfor efficientproduction from limited areas.

Thisstudy examines current yield and quaity levelsof cottonand a s thepotentialfrprodon improvementduring the decadeahead, seekig to (a) increasethe profitablity of cotton and its by- prducts for growers, and (b) improvecotton's competitiveposition in the marketplace. The study identifiesprospects for improvementin cotton productiontechnology and demonsrates how this informationcan be shared, focusingon current and fiture cottonproduction technologies in the major cotton-producingcoontries: China, the UnitedStates, the formerUSSR, India, Pakistan, al, Tburkey, and Egypt.

This paper is de first in a series of studiesexamining opportunities for and consuaint to improved globalcotton production and markeding.Because cotton is one of the world's mostimportant agricultural cashcrops, prospects for improvedproducton havefar-reaching implications - for farmers, for national economies,and for the Bank's own agricultura lendingportfolio.

MichelPetit Director Agriculre and Rural DevelopmentDepartment

(v) Abstac

Cottonis animportant crop In manydevdoping countries, both . a sourceof inowmefor hs growrs and as a sourceof foreignexchang. Additionally,it offersumona work for lag mmbe of people. Thedevelopment of the textileindustry, a majoremployer ad providerof valueadded export, s dso significantin manycouies. Cottonis producedprimarily for itsfiber. Conseed, however,is hesecond most import source of vegetableoil in theworld, and cotseed cak Isa vauable,high-pwrotein ckfeed. Whenpropely processed,cottonseed flour is also a valuablesorce of proteinfor humans. Mhevalue of cottonseedas a sourceof oil andprotein is oftennot filly exploited. In manycountries, the sustainabilityof profitablecotton production appeas to be threatened. Populaon pressuresneceitate increasedfood productio, resultg in ineaig competitionbetween cottonand food cropsfor landand labor resources. Ihere are growig concernsover the possible environmentalimpact of pesticideuse in cottonprod on. Fur more,an increa in relay,stri, and mixedcropping of foodcrops with cotton is likely. Theintroduction of openmarket economies and the removalof subsidieson coton inputs is likelyto havean impacton the competiivenessof cottonwit altentiv cropsin counes wherecotton has previously been produced under close goverment controL Withconsumption steadily increasing, and new acreage for production limited, any increase in production s likelyto comefrom increased yidds rather than from increased area devoted to cottongrowing. This willrequire the intrduction of newtechnologies for efficet productionfrom limited areas. Thisstudy examnnes current yield and quality levels of cottonand assesses the potential for pduction improvementsduring the next decade,sedirg tD (1) incease the profabilit of cottonand its by- producsfor growers,and (2) mprovectons compettivepositio in the mrklace. The study focmuseson curren andfuture cotton production tecnologies in the majorcotton-pducing countres: Cia, theUnited States, the former USSR, idia, Paitan, BRazil,Tikey, andEgypt In the 1991-92 marketingyear, these countries accounted for roughly 85 percentof woddprodwuco Ti analysisof curent productonpracices n the major counti idextifiespropect for improvementin cottonproduction, tehology in ihenext decade ad iluaes howthis infmon can be shared.The countriessudied have good research facilities; in may deveopingcounties, however, finnci constaintsimpose restictions on traw ad libaries, thus preventngresearcer from mai nig conct withdevee in ot countries.The success of thereearch institutes dtat come underthe umbrllaof theConsultative Group for International Agdcultural Research (CGLAR) at to theappropriateness of the commodity and regiond research apa Anotherarea for regionalresearch anddevelopment is in addressingthe careless, often iiscimine useof insecticides,which has created seriousproblems with insecticide resitan In mostdevloped countries, the need to strenten the linkaes in the grower-to-arketchain and thelinkages among reear, extension,and growers is increasinglyreoized. In developingcoumtries, however,the grower-t-market lins areusuly absent,and the r _ on -growerlinks essenia to thetransfer of techologyare often wea Thisis a diffict problembecause of the larg numberof growersinvolved in smallholderproduction. Hence, new approaches in tecology dissemi n are needed.

(Vii) On under resarobed and under utilized are, particularlyIn deveoping countries,is the use of cottonby-products, i.e. eed, lintr, and stalks. the economicsand benefitof suchresearch and its aplication noee to be evaluated.In sum, cottonagro-industries have not been fullyexploited, and more value addedactivides could boostcotton production prospects in the decadeahead.

(yin) Abbreviadons

CCII ChineseCotton Reseach Ilstitute CGLAR ConsultativeGroup for Internatio Agricltura Research CIP CentroInteiacional de la Papa (Intertional Potao Center) CIRADCA Centrede Coopration Intntionale en RechercheAgronomique pour la Ddveloppement:Ddpartement des CulturesAnnuelles cm nimeter CPE CentrallyPlanned Economy CPI ConsumerPrice Index EEC EuropeanEconomic Community ELS Extra-longstaple EMBRAPA EmpresaBrasieira de Pesqisa Agropeuarian(Brazilian Entrprise for Fisheries, Agricultre, and Livestock) FAO Food and Agiculture Organiationof die UnitedNations FAS ForeignAgricultre Service,U.S. Departmentof Agriculture FSU FormerSoviet Union GOT GinningOutturn ha hectare HVI High-VolumeInsumeion ICAC InternationalCotton Advisorj Committee ICAR Indian Councilfor Agricultual Research IPM Integated Pest Management IRCT Institutde Recheches du Caton et des Texles Exotiques(Research Institute for Cottonand ExoticTextiles) MEU InternationalRice ResearchInstitt LMIC Low and MiddleIncome Countries (see CountryClassification Table) LS Long staple MADIA ManagingAgriculural Develpment In Africa mt metric tonne MUV Manufacting Unit Value NARP NationalAgricultu ResarUchProject (Eypt) NMOs Non-GovernmentalOgaizati OECD Organizationfor EconomicCoopeation and Development OTA U.S. Officeof TechnologyAssessment PCCC PakistanCentral Cotton Committee USDA U.S. Departmentof Agriculture

(IX) OrganizationsInvolved with Work on Cotton

Centre de CoopEration Internationale en Recherche Agronomique pour le Diveloppenut: Ddpartement des Cultures Annuelles (CIRAD-CA)

The lnstitut de Recherches du Coton et des Textiles Exotique (IRCT) was meged in 1992 with two other research institutes to form CIRAD-CA. IRCT was established in 1945 to conduct cotton research in the francophone countries of West Africa. Their work has expended to other countries, including cotton development projects in Thailand, Vieuam, the Philippines, Paraguay, Nicaragua, Brazil, El Salvador, lran and Zambia and more recently in Peru, Ecuador, Costa Rica, Nigeria, Malawi, Turkey and Laos. The IRCT achievementsin plant breeding have had an impact in all these and other countries while their work on fiber quality has attained world recognition.

Director of the Cotton Program: Michel Deat Address: 2196 Boulevard de la Lironde Montferrier-sur-Lez BP 5035 34032 Montpellier Cedex 1, France Telephone: (67) 61 58 00 Facsimile: (67) 61 58 71

Commonwealh Agricultural Bureau International (CAB nttional

CAB International is an intergovernmentalorganization, established by a treatylevd agreement early this century as a center for gatiering and dissemnating agdcultural and related scientific information. Emphasis is on providing information and support services to developing countries.

CAB International has establishedfour scientific institutes, each of which is recognized in its own right as a center of excellence. The Instiutes of Entomology, M4ycologyand Parasitology conduct taxonomic research and provide diagnostic services for organisms of agriculural and economic importance. Tne fourth insttute, the Intenational Institute of BiologicalControl, was established in 1929 to conduct research on the use of biological organisms, insects, nematodesand microorganism, for the protection of crops from pests, diseases and weeds an to improve crop productivity.

Address: CAB Inernational Wallingford Oxon OX1O 8DE United Kingdom Telephone: (0491) 32 111 Facsimile: (0491) 33 508

(Xi) Ibe addressof the InternationalInstitute of BiologicalControl is: Director: Dr. Jeff Waage Addrs: SilwoodPark BuckhurstRoad Ascot, BericsSLS 7TA UnitedKingdom Tdephone: (0344)87 2999 Facsimile: (0344)87 2901

COto Oulook

CottonOutlook, located in Liverpool,with a U.S. officein Memphi, collects nformationon the cottonsituation worldwide. It publishesboth weeklyand daily information. The CodoolcA Index"mand CotlookB Index" for mediumand coarse count cottonsrespectively, present average price quotationsand are the internationally acceptedcotton price measurements.

Director: John Anderson Address: OutlookHouse 458 New ChesterRoad RockFerry BirkenheadL42 2AE UnitedKingdom Telephone: (051)644 6400 Facsimile: (051)644 8550

Fas 0i.dtu

Ihe Faserinstitutis locatedin the BremerBaumwoilb5rse and is concernedwith the asessment of fiber properties. It conductsannual round tests in whichfiber samples are distributedto fiber laboratoriesto checkthe calibrationof instrumentsin different countriesagainst each other. Roundtests are also conductedfrom the Faserinstit in conjunctn with the 1TMFWorking Groups to compareisuments being developed to assessthe fiber properdesstudied by each group.

Director: Dr. HelmutHaig Address: BremerBaumwollbOrse Wachtstrasse17-24D Postfach106727 D-2800Bremen 1 Germany Telephone: (421)32 1901 Facsimile: (421)32 7409

(xii) bntwn11mlCottim Aivory CommItte (ICAC) Mm ICACIs an associationof governmentshaving an Itomt in dheproducdon, export, importad consumptionof cotton. It I an organizationdsiped to promote cooperationin cottonaffairs, particularly those of inernationalscope and significance. It affordsits membersa continuousunderstnding of the world cottonsitauon and providesa forum for iernational consultationnd discussion. The Committeehu consultativestatus with the UN and its specializedagencies and coopeates closely with other intemationalorganizations in mattersof commoninterest.

Ihe functionsof the ICACare definedin the Rules and Regulations,copies of which ae availableon request. Theseare: * To observeand keepin closetouch withdevelopments afftng the world cottonsituation * To collectand disseminatecomplete, authentic and timely statisticson world cottonproduction, trade, consumption,stocks and prices. * To suggest,as and whenadvisable, to the govemnmentrepreented, any measuresthe AdvisoryCommittee consides suitableand practicablefor the furtheranceof intentonal collaborationwith due regardto maintning and developinga soundworld cotton economy. * To be a forum for int onaldiscussion on mattes relatedto cottonprices.

The TechnicalInformation Section of the ICACwas establishedin 1982with the objectves of compilingand disseminatinginformation on cottonproduction and researchwhich is of interestto membercountries and promotingcooperation and excange of informationbetween research scientists in differentcountri.

Publicationsinclude a bimondtlyCotton Review, a quarterlyBulletin of Statisticsand a bimomilytechnical news letter calledthe ICACRecorder.

ExecutiveSecretary: Dr. LawrenceShaw Address: 1629K Street,NW, Suite702 WashingtonDC. 20006 Telephone: (202)463 6660 Facsimile: (202)463 6950

(Xiii) I1 _IadmalTetlb Manufactu FederationAMP) The 11 Is a federaionof nationaltextDe manufaurers associations. It provides informatonon textilemanucture and trade and is a forumfor exchangeof informationbetween texidle manufacturers. The ITMF is concernedwith matters pertan to textilequality and this reflectsback to the qualityof the raw material used in textilemanufac It has a CottonSpinners Committee which is concerned withmars pertainingto yan quality,particularly raw materialquality and foreign matter contontad supponsfive workinggroups on variousaspects of fiber quality. lbe groupshave membersin a numberof countrieswho get togetherevery two years at theIntrnational CottonConference in Bremento discussdevelopments in the lnstnunentatlonto assess: * Fiber lengthand lengthdistribution, particularly short fiber

* Fiber finenessand matrity

* Dust andfine particulate matter in cotton

* Cottonstickiness

* High VolumeInstrumtation (HV

ExecutiveDirector: Herwig Strolz Address: Schanzengraben29, PostfichCH-8039 Zunrich Switzerland Telephone: (01)20170 80 Facsimile: (01)20171 34

Natral ResourcesInstute (NRI)

The NRI is the scientificarm of the OverseasDevelopment Administration in England and has been involvedin research,particularly in the field of ntgrated Pest Management,in many countriesof the world.

Address: Cental Avenue CbathamMaritime Kent,ME4 4TB UnitedKingdom Telephone: (44)(634)88 3054 Facsimile: (44)(634)88 0066

(Xiv) Country C f s CentralAfrke Region Botwana, Leotho, Namibia, Swaziland,Kenya, Malagoy Republic, Malawi, Monzmbique, Tanzania, Ugnda, Zambia, Angola, Bunmdi, Cameron, Central African Repubbe, Chad, Congo, Cote d'lvoirc, EAhiopia,Djibouti, Benin, Gabon, Gambia, Ghan, Guine, Equatorial Guinea, Guinea-Biauu, Libera, Mali, Maudrani, Muritius, Niger, Reunion, Rwanda, Scnepl, Sierra Leone, Somalia, Sudan, Togo, Upper Vola, Zaire, Zimbabwe. High-Icme Countries OECD: Austral Austria, Belgium, Canada, Dcnmark, Finland, Franue, Germany, Icelnd, Ireland, lWy, Japan, Luxembourg, Nctheriands, New Zealand, Norway, Spain, Sweden, Switzerland, United Sates, United kigdom. Non-OECD:Andorn, Arba., Bhgm, Bermuda,Bruni, Chmnl Islands, Cypra, Facro slnds, Freach Polynesia, Groeland, Hong Kong, Israel, Kuwait, Mayotce, OAEV, Qatar, Singapore, United Arab Emirat, Virgin Islands (US).

Low-wd Me-Income Counes LWCS) AftiC. Angola, Benin, Botma, Burin Faso, Bumndi, Cameroon. Cap Verde, Centrl Aficn Rep., Chad, Comoros, Congo, Rep., Cote d'lvoire, Djibouti, Equatorial Guinea, Ethiopia, Gabon, the Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lcsotho, Liberia, Madagscar, Malawi, Mali, Maurnia, Mauritius, Mozambique, Namibia, Niger, Nigeria, Reunion, Rwanda,Sao Tome and Principe, Scncel, Seychelle, Sierra Leone, Somalia, South Afica, Sudan, Swaziland, Tanzania, Togo, Uganda, Zaire, Zambia, Zimbabwe.

Amerfw Antigta and Baubuda,Argentin, Barbados,Belize, Bolivia, Brazil, Chile, Colombia, Cosa Rica, Cuba, Dominica, DominicanRep., Ecuador, El Salvador, French Guina, Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamnica, Martiniquc, Mexico, Netherands Antilles, Nicaagua, Panama,Parguay, Peru, Pucrto Rico, St. Kitts and Nevis, St Vincent, St. Lucia, Suriname, Trinida and Tobago, Uruguay, Vcnezucla.

ASiaaid Pad1k: American Samoa, Bangladesh.Bhutan, Cambodia, Fiji, Guam, idoncsia,K1bati, Korea Dem. Rep., Korea Rep., Lao PDR, Macao, Malaysia, Madivea, Mongolia, Myanmar, Nepal, New Caledonia. Pacific annds,Trust Territory, Paisn, Papua New Guinea, Philippines, Solomon Ilands, Sri Lanka, Thailand, Tongs, Vanuatu, Viel Nam, Western Samoa.

Ewupe: Albania, Bulgaria, Czechoslovaia, Former Soviet Union (FSU)Z, Gibraltar, Greece, Hunpary, Isle of Man, Malta, Poland, Portugal, Romania, Turky, Yugoshvia.

Midl Eastnd Norh Afa*w Afghfnistan,Algei, Bahrmin,EgytArab Rep., In slmic Rep., Iaq, Jordan, Ldbanon, Libya. Morocco, Oman, Saudi Arabia, Syrian Arab Rep., Tunisia, Yemen Rep.

I/ O,w Asib, Ecwai:_ - Taiwan, Chiz & Dow wenot evahbl. fr indus rapuh/cs

(XV) Introduction

Cottonis one of the world's mostimportant agricultural cash crops. The lint is universallyused as a textileraw materialwhile the cottonseedis the secondmost importantsource of vegetableoil and the cottonseedcake is a rich sourceof high qualityprotein for animalfeed or, withcareful processing, for humanfood.

Figpre 1: CottonseedUtilzation NEATS CAKEAND WEAL FLOUR Bread, Cakesand ConfectIonery STOCKFEED Beef and Dairy Cattte, Sheep,Horses, Mules, Poultry and Hogs. FERTILIZER

-CRUDEOIL-TREFINED OIL Salad and CookingOIL, Mayommise, Salad Dressing, Shortening, SOAPmargarine,NeLlorine and Packing Oil FODTS-T- SOAP G-LYCERINE Explosfve, Pharmaceuticals, FoodPreparations and Cosmetics. -LIVESTOCltFEED FATTYACID Rbber, PLastics, Insecticides, Fungicides, NetalLic Soaps,Waterproofing, Leather, Paper and Textiles HULLS-- STOCKFEED Beef nd Dairy Cattle, Sheep,Norses and MuLes -FERTILIZER MuLchand Soil Conditioner -OIL DRILLINGMD BRAN Livestock Feed FIBER Pulp - SameUses as Linters FURFURAL Synthetic RU*er, Petroleun Refining and Plastics

LINTERS PULP VISCOSE- RAYON Air Hose,Industrial Fabrics CELLULOSEESTERS AND ETHERS CELLULOSENITRATE CELLULOSE--YARN Clothing, HouseholdFabrics ACETATE -PLASTICSAutomotive Upholstery, ELectrical Equipment,Toiletware, Pensand PenciLs -FILIIS - X-RAYAND PHOTOGRAPHIC - PAPERS Writing, FiLter and Absorbent ABSORBENTCOTTON MEDICAL SUPPLIES YARNS Lampand CandleWicks, Twine, Rugsand hops FELTSFOR: AutomotiveUpholstery, Pads, Cushions, Furniture Uphotstery, Comfortersand Mattresses.

SOllRCE Anon, 1950.1978

Since the late 19thcentury, cotton has faced increasingcompetition from syntheticcellulosic fibers such as rayon and non-cellulosicfibers such as nylon and polyester. Polyester,in particular, becamea major competitorbecause it impartscrease-resistant, easy care properties,even though cotton has advantagesin apparelcomfort, particularly in warm climates.At the sametime, the creaseresistant, easycare propertiesof polyestercomplement the comfortof cotton in blendedfabrics.

Cotton also faces increasingcompetition for land, labor and other inputs from other crops becauserising productioncosts of cottonhave not bee matched by increasedprices. Population pressureshave increasedthe needto expandfood productionand prce and marketreforms have had a favorable impact on the returns to alternative crops. - 2 - Developmentsin textiletechnology over the last 30 years, particularlyin machinecapacity and automation,have been drivenby economicfactors and have resultedin demandsfor improvedcotton quality, particularlyin fiber strengthand uniformity. In order to optimizetheir operations,spinners require more informationabout the characteristicsof their raw material. This has contributedto the developmentof High VolumeInstrument (HVI) testing of cottonto replace traditionalhand pulling methods. This development,in turn, has increasedgrower awareness of the importanceof fiber quality in additionto yield. This has engenderedan awarenessof the needfor strengtheningthe linkcagesin the grower-to-marketchain. Thesechanges are being reflectedin changesin the pricingstructure to take accountof specificfiber characteristics and in the objectivesof cottonbreeding programs directed towards the developmentof the combinationof fiber propertiesdesired by the textileindustry.

In most cottonproducing areas, the crop is exposedto the depredationsof variousinsect pest speciesover a substantialpart of the season. To achieveacceptable yields and to maintainintrinsic fiber quality,heavy reliance has beenplaced on chemicalinsect control. In many cases, this has resultedin increasinginsect pressure because of pesticideresistance and becausepreviously unimportant pests have becomemore of a threat. Furthermore,there are increasingconcerns regarding the environmentalimpact of excessivepesticide use and seriousprograms in practicalapplication of IntegratedPest Management (PM) are beingdeveloped in developedas well as developingcountries.

Cottonproduction prospects during the 1990swill dependlargely on developingappropriate technologythat encompassesbiological-environmental and socio-economicdimensions to ensure sustainableproduction of fiberthat is competitivein qualityand price withalternatives. The achievement of these objectiveswill dependon the developmentand distributionof varietieswith satisfactoryyield potentialand fiber characteristicsthat meetthe needsof developmentsin the textileindustry. Production technologywill be requiredto ensuresatisfactory yields while conaining production costs. The valueof cotton is a functionof the yield of seedcotton;the proportionof the lint in the seedcotton(Ginning Outturn- GOT); the spinningvalue of the lint (whichdepends on the length, strength,fineness, and maturityof the fibers); and the value of the cotton seed by-products. Integratedpest management sutategieswill be neededto ensuresustainable cotton production systems that will providesatisfactory yields while mitigatingadverse environmental impacts. The achievementof these objectiveswill be reflectedin increasedreturns and improvedcotton quality.

Ihis publicationis a review of how these problems influence current cotton production technology,the technicaland economicconstraints to adoptionof new technology,changes that can be expected in supply and demandduring the next decade, their impact on prices and how cotton productivityand qualitycould be improvedto ensurecustomer satisfaction and acceptablereturns in the grower-to-marketchain.

For this publication,China, the UnitedStates, the formerSoviet Union (FSU),India, Pakistan, Brazil,Turkey, and Egyptwere selected, partially on the basisof their major contributionof 85 percent of the 1991-92world cottonproduction (ICAC 1993a). This paper briefly discussesthe economic importanceof cotton to developingcountries, looks at the structureof the cotton industryin general, addressescotton production, and presentsworld production and consumptionforecast to the year 2005. The role of varieties,IPM, and researchto includeboth the applicationand managementof inputsis seen to dependboth on technologytransfer from researchwithin the countryand from other countriesas well. Technologyis seento result in reductionin the cost of producingcotton and/or increasesin cottonyield. Finally,cotton production and consumptionforecasts to the year 2005 indicatethat productioncan only be increasedby increasingyields. The current rate of yield increasescan only be maintined through increasedtechnology. An appendixcontains detailed regional forecasts for productionand consumption to the year 2005 and discussescotton production in the abovementioned countries in detail. This backgroundinformation will be used as the basis for developinga multi-countrystdy of cottonproduction technology to identifyconstraints to increasedproductivity and improvedquality and howtechnological innovations in variouscountries can be used to developa sustainable,environmentally friendlyindustry which meets the needs of both the producerand consumerin the next decade. 1

Economic Importance of Cotton

Cottonproduction is crucialto the economiesof manydeveloping countries in Africa, Asia and Latin America,where it makesmajor contributions to foreignexchange earmings. While the ecowmic importanceof cottonis mainlyfrom its fiber, cottonseedby-products are valuableand are widelyused in relatedindustries. Cotonseedscontain about 24 percentprotein, the main componentof cottonseedcake. Cottonseed cake o'rmsabout 47 percentof the productof oil expressionand is used for livestockfeed for ruminant animas and as a fertlizer. Oil consues about 15 percent of the cottonseedand is used for manufacturingmargarine, shortening, edible oil, and other food products. It is also used in manufacturingindustrial products such as soap and paints. Huls form about40 percentof the seed and are used mainlyas fertilizeror as roughagein stockfeed.

The compositionand extentof ginnerywaste depend on the typeof harvesting.With hand-picked cotton, the waste is mainlyleaf and fibrousmaterial, whereas with machinepickedcotton, waste can includegreen bolls, sticks, and portionsof the boil wals (burs). Ginnerywaste makes good compost, and researchis also being conductedin vwariouscountries to convert it ifto usable energy (Bakerand Griffin1984).

The linters (the fuzzleft on the seed after gining) vary withvariety but usuallyform about 10 percentof cottonseed. Linters,motes (undeveloped seeds), and the fibrousmaterial from the ginnery waste have many uses in the productionof felts, mattresses,bedding, and upholstery. They may also be used with low-qualitycotton as raw materia in the paperand rayon industriesand are importantraw matals in manufacturingphotographic paper, x-ray film, and explosivematerials.

Cotton plays a significantrole in various aspects of the economyof the major producing developingcountries. In India,for example,no cropcan compete with cotton's potential for valueadded in processing(Htchings 1984). The incomesof over 60 millionpeople come from the production, processing,and/or exportof raw cottonand cottonteile goods(Bell and Gillham1989). In Pakstan, cotton productionaccounts for 15 percent of the agriculturalsector's output, 50 percent of export earnings,and over 50 percentof domesticedible oil. Cottonproduction provides employment to over 5 millionpeople engaged in cottonproduction and its processingin relatedindustries (Bell and Gillham 1989). In Turkey, cottonis one of the principalexport commodities and is a major direct and indirect contributorto the economy,providing employment both in farming and related industries(Bell and Gillham 1989). Cotton is vital to the economyof Egypt in terms of providingemployment both in agriculturaland industrialsectors, and it is the country'smost importantagricultural export (Bell and Gillham1989). In majorcotton-producing countries, cotton-based extle industrieshave pavedthe way for further industrializationand investment,with prioritygiven to exportingcotton textiles rather than raw cotton. Conversely,some countriesin SoutheastAsia that have experiencedrapid expansionin textle productionhave beenatempting to developcotton production to reducereliance on importsof raw cotton. The expansionin the textile industrieshas contributed nmemousemployment opportunities in the industrialsector, and successfiucotton production would add seasonalwork and cashflow in the rural sector. 2

Structureof the Cotton Industry

Distribution of Cotton Production Areas

Cottonis producedin about76 countriesin bothtropical and temperateclimatic regions. About 65 percentof worldproduction is between30'N and 37 N latitude. This regionincludes production areas in the UnitedStates, parts of the former SovietUnion (FSU), and China. Smallcotton-producing areas in Greece,Bulgaria, Romania, China and parts of the FSU are furthernorth. The balanceof the cotton- producingareas are between30"N and 30'S latitude,with about 10 percentin the southernhemisphere (Bell and Gillham1989). In 1991192,85 percentof the worldcotton crop was producedby the United States,the FSU, China, India, Pakistan,Egypt, Brazil and Turkey (ICACApr. 1993).

CotOn P_Ndmtion SYSteM

Policiesof supplycontrol and of price and incomestabilization in manycountries exert a direct or indirectinfluence w cottonproduction. Production is also influencedby someform of subsidyin all countriesand by prike nimums in most countries(Bell and Gillham1989). However,subsidies are often offsetby taxes cnithe crop, dutyon exports,and overvaluedexchange rates.

Cottonproducion systemsare diverse,ranging from smallholdings in most developingcountries to large-scaleoperatior;s in developedcountries. In smallholdings,cotton competes for arableland and is often interplantedoi relay croped with food crops. Productionis labor-intensive,with most field operationsmanual anwusually carried out by fbmily labor. Access to high-technologyinputs in productionand marketingis minimal. In large-scaleoperations, cotton is grownon its own, production is capital-intensive,and field operationsare carried out in a timely manner using high-technology, mechanizedproduction and marketingmethods. Yieldsin smallholderoperations are often depressed becauseof competitionamong crops for land and labor, leadingto lack of timelinessin field operations and to difficultiesin weedcontrol, insect control and picking. Lack of timelinessmay also be due to lack of interestby the farmers in countrieswhere there is closegovernment regulation of production,where prices are depressedor wherepayment is delayed.

npct of Farm Size The reductionin cost and other advantagesof large-scaleproduction oDuld be achievedby consolidatingcotton-growing areas so that a group of smallholdingscan be treatedas a large farm. This processwould enablefarmers to share mechanizedequipment and labor resourcesto ensuretimeliness in land preparation,planting, weed control, insectpest managementmeasures and harvesting. This practiceis being successfullyfollowed in Chinaand Greece. DetaRedanalyses of economiesof scale in the cottonproduction in developingcountries are not curenty available. Giventhe relativecost of labor and capitalbetween U.S. and developingcountries, economies of scale are expectedto be realized. In a studyby the U.S. Officeof TechnologyAssessment on the economicimpact of emergingtechnologies -8 - and selectedpolicies for various-sizecrop farms, the majorfindings for cottonfavor very large farms of about 1,214ha whichhave a 2 percentcost advantageover medium-size farms of 263 ha (OTA 1986c). Impactof Priceand InsdtfuonalOrganzatons A WorldBank studyon ManagingAgricultural Development in Africa (MADIA)analyzed the impactof price and non-pricefactors on cottonproduction and the variationsin performancebetween two Francophonecountries (Cameroonand Senegal) and four anglophonecountries (Nigeria, Kenya, Tanzania,and Malawi). The study indicatedthat the impactof price factors on cottonproduction is importantfor determiningshort-run shifts between food and cash crops. However,prices must not be consideredin isolationbut in relationto a range of non-pricefactors, such as research, extensionand institutions.These two setsof price and non-pricefactors jointly explainthat the greaterrelative success of the cottonindustry achieved in francophonecountries has mainlybeen due to the structureof the cotton industry, which exhibits a higher degree of coordinationamong the different productionactivities. Institutionalfactors in francophonecountries have more effectivevertical integration and havebeen the drivingforce for the countries'success, leading to highercotton yields (Lee et al. 1989).

Mkt SMO d Cota in

Crtton is harvestedin the form of seedcottonand requiresginning to separatethe lint from the seed. Gi ning servicesdiffer amongcountries and may be providedby privatecompanies, cooperatives, parastata arketingboards, or other quasi-publicagencies that assumeresponsibility for ginningand marketing(World Bank, CottonHandbook, 1981, p. E-l). Ginningservices also assumeresponsibility for the dis osal of the seed, either as stockfeedor to oil expressors. In the past, the value of the seed has been expectedto coverginning oDsts.

In all countriesexcept Australia, Argentina, Brazil, Israel, Mexico, and the UnitedStates, the farmgateprice for seedcottonis declaredby the governmentat the beginningof the marketingseason. In all countriesexcept Australia, the UnitedStates, and the large operationsin Guatemala,seedcotton is graded on deliveryto a purchasingcenter to establishthe price to the grower. Payment may be immediatein fullor in part, or it maybe delayedfor a shortor extendedperiod (Bell and Gillham1989).

Farmersin aUcountries receive some form of subsidyor preferentialallocation of inputs such as seed, fertilizer,pesticides, or irrigaticnwater. Even areas withlitte or no direct subsidyon inputs such as Australiaand the westernUnited States receive indirect subsidies on irrigationwater (Belland Gillham1989). However,taxes in someAfrican countries may offsetsuch direct or indirectsubsidies.

In most developingcountries, market information is not readily available,and farmgateprices declaredby the governmentdo not necessarilyreflect world coton values. Cottonprices do not present appropriatesignals to growers in planningfuture acreageunless they are linked to price changesin compedngcrops, nor do they reinforceincentives to increaseproductivity or improvequality.

A combinationof structuralelements occurs fairly frequentlyin the cotton industryof many developingcountries involving smallholdings, government regulations that allow easy entrybut difficult exit from production,immobile capital investment, government interference and price distortions,and relativelystagnant technology. The ownershipand managementorganization of cottonproduction also encompassesa wide range of relationshipsthat include owner operation, sharecropping,leasing, cooperatives,corporations and state ownership(World Bank, CottonHandbook, 1981, P. m-l). 3

Cotton Policy

Introduction and Country Classirication

The governmentsof most cottonproducing countries are heavilyinvolved in cottonproduction and marketing(Bell and Gilham). Govemmentpolicies and programsaffect the location of cotton production,consumption, and prices. Thesepolicies can be groupedinto four broad categories(ICAC 1993c):

1. policiesdesigned to boostfarm incomewhile interferingas little as possiblewith the levelof marketprices;

2. policiesdesigned to controlthe cotton sectorthrough extensive state regulation;

3. policiesdesigned to manage domesticcotton prices so as to boost exportsof texties and apparel;and 4. free marketpolicies.

Hence,cotton production is directlyor indirectlyaffected by the policiesof supplycotrol and price and incomestabilization in many countries,by some form of subsidy in all countries and by effectiveprice minimumsin most countries(Bell and Gillham1989).

hn all countries,farmers receive some form of subsidizedassistance or preferentialallocation of productioninputs such as plantingseed, fertilizers,pesticides, and irrigationwater, includingAustralia and the UnitedStates, where water is indirecly subsidized.

Category 1: United States, Turkey and Brazil

The UnitedStates, Brazil, and TIrkey all have a policythat roughlyfits into categoryone. The governmentloan conceptis appliedin the UnitedStates and Brazil. The govement takes possession of the loan cotton in the United States, while the farmer retains possessionin Brazil. Brazil uses financingto controlsupply while the UnitedStates employs acreage controls by not allowinggrowers to participatein governmentpmgrams if they exceed a cerutainlevel of plantings. This requirementis knownas the AcreageReduction Program (ARP) and variesbetween 5 and 25 percentof so-calledbase acreage. Thesegovernment payments are madedirecdy to farmers(as wellas other marketparticipants - merchantsand mills) and are generallyconsidered not to interferewith markettransactions or distort pricesin the short run. However,the reverse is probablytrue as seenin a later section.

UnitedStates

The U.S. cotton program is a complexweb of income and price supports that have been combinedwith acreage reduction programs to supportdomestic U.S. farmincome since 1973. The entire evolutionof the U.S. Governmentinvolvement in cottonoDvers a much longerperiod and is contained - 10- in Appendixm, togetherwith a detaileddescription of the current legislation.This section only briefly lools at these issues. Allotmentsor marketingquotas were in effect from 1934to 1970when set-asIde programsand later acreagereduction programs were used. lhe loan rate (1933)was originally desige to suppoitU.S. domesticprices as the governmentwas obligated to acquirecotton from the farmer at a "parity' price or later at a movingaverage of past marketprices (subjectto statutoryminimums), with the farmerhaving the right to redeemthe cottonwithin a specifiedperiod if prices rose abovethe loan rate. The originalconcept of a target price was first introducedin 1973. Whenmarket prices fall below the targetprices, the US Governmentsubsidizes the difference(subject to certainlimitations) by malig what is known as a "deficiencypayment" to farmers. Currently, in order to receivethe benefit of goverment programs.farmers must participateby plantingonly a certainpercentage of what is mnown as 'base acreage." In additionto receivingdeficiency payments, the armerwho complieswith planted acreageprovisions is also eligibleto use the loan programadministered by the USDA.

Prior to 1985, the U.S. Farm Legislationwas both price supportiveand price stabilizingfrom the world's viewpoint.U.S. stocksfunctioned as worldbuffer stocks, i.e. they werenot availableto the marmt whenprices fell and becme availableto the marketwhen prices exceededa certainlevel. The Agricultura and ConsumerProtection Act (1973) set the loan rate at 48 ctsfib and built inflaoary impactsinto the program. The Legislationof 1981progressively raised the minimumloan rate from48 to 55 cents/pound. The use of the loan rate as a policytool changeddrmatcally with the 1985 cottonlegislation, whenthe conceptof a 'marketingloan" was introduced. Basicallythe marketingloan states that if the world price for cotton, adjustedfor U.S. qualityand location Ocmownas the AdjustedWorld Price - AWP), is below the loan rate, cottonthat is placedunder loan at a specificloan rate can be redeemed at this lowerprice, withthe gcvernmentsubsidizing the diffece (again,subject to certainlimitations). This AWPis calculatedfrom an indexof worldprice offerscalled the CotlookO"A index (See the section on Internationalorganizations). U.S. Governmentprograms under the 1985 legislationwere to be designedin a matterthat resultedin projectedending stocks in the UnitedStates of four millionbales.

Otherprovisions have been addedover the past few years, eidterby legislationor by so-called "administraiverules' that permit the USDAto makecertain chages under legislatedauthority. The major changeshave been that whenthe U.S. price is greaterthan the worldprice, both U.S. mills and exporters are also paid to spin and export U.S. cotton. Under 1985 legislation,the USDA had discretionaryauthority to reducethe AWPfor loanredemption even furter than the fora calculation. Underthe 1990legislation this discreionaryauthority, which was rarely usedunder the 1985legislation, becme knownas "StepLO The paymentt U.S. mills and exporterswas called'Step IL" The 1990 legislationalso set targeted ending stocks at 30 percent of anticipateddisaerance, which for all practicalpurposes is between4.5-5.0 millionbales.

It is not the purposeof this text to analyzethe impactof U.S. Cottonlegislation on worldcotton production,consumption, and prices. During the five-yearperiod 1988-1992, the U.S. cottonprogram resultedin outlaysaveraging $1.13 billionper year, or 15 cents/lbaveraged over all production. By contrast,EEC cottonsubsidies averaged almost $2.00/lb per year. U.S. consumptionhas increasedfrom 5.54 millionbales in 1984/85to around10 millionbales in 1992/93,while world consumption has only increasedaround 25 percent. U.S. cotton productionin the ten years prior to the 1985 legislation averaged18.1 percent of worldproduction. From 1985186to 1992/93the averagehas been 17.4pere - 11 - Brazil The Governmentof Brazilis involvedin cottonproduction by settingminimum seedcotton prices and allocatingcredit. The amountof funancingavailabie to farmers is based on farm size and made availableby the Comissaode Financiamentode Producao(CFP). Due to rapid inflation,support prices were adjusted each month, based on a Governmentdirective. In August 1992, the govermment inplementedan Indexof LiberalizationFunds that is used to adjustthe supportprice eah month. This indexis tied to an indexused to adjustprices according to inflation. Final adjustmentsin supportprices occur in July of the marketingyear. In the eventof the governmentacquiring title to the cottonvia the loanrate mechanism,an exportsubsidy program can also comeinto in effect. In this instance,the cotton is generally marketed in weekly meetingswith exporters, who present tenders for sale, the CFP determiningif they representmarket prices. Afterthe amountof subsidyis set, the exporterscan accept or reject the subsidy.

Due to financialconstraints, The Governmentof Brazil has used the support price more as a mechanismto encourageor discourageproduction rather than to provide incomesupport for farmers. A State ValueAdded Tax is leviedon exports,but the Govemmentmay delay monetarycorrections in this tax to encouragecotton exports. Eventhough Brazil has becomea net importerof cottonin the past two years, the textile industryprimarily utilizes higher grade cotton. Consequently,a large percentage of Brazilianlow gradesare exported.

Turkey

Since 1980 Turkey has been moving from an import substiutionbased strategyto an export orientedand liberalizedeconomy with a view to expandingthe textilesector.

In Turkeythe state cooperativesof Cukobirlik,Antbirlik and Tans are chargedwith prcuring cotton only whenthe price faiL to support levels (whichdiffer betweenregions) establishedby the Governmentthrough the EconomicAffairs High Coordination. However, cooperativesplay a very importantrole and all growersare requiredto have a contractwith their cooperative. If the price support mechanismis implemented,revenues or costs are fbr Governmentaccounts. However,in many years, the cooperadvesdetermine the procurementprices in consultati(,nwith the governmentand profits or lossesare for the privatecooperative accounts.

Farmershave severaloptions. They can eitherhave the cottonginned for their own accountor sell seedcottonto the ginnery,cotton merchant, cooperative, or exporter. Salesto exporterspredominate in Antalya,where exportersalso operatethe ginneries.

Sincethe Governmentfavors value addedexports to thoseof cottonfiber, exportershave to pay a levy, establishedby the Councilof Ministers,into the Price StabilizadonFund for each ldlo of cotton exported. Levieshave variedgreatly both betweenregions and seasons. Turkeywill expandproduction with the completionof the GAP (SoutheastemAnatolian Project), Turkey's largest and the world's third biggestagricultural and energybased project. A total area of 1,7000,000hectares will be irrigatedwith approximately25 percent of this area to be under cotton production. Hence,the cottonarea will increaseto 161,000hectares in 1994and graduaUyincrease to 425,000hectares by 2002. - 12 - Category2: China, Central Asia, and Egypt owa Governmentpolicy towardscotton production in Chinaha chandgeddramatically over the past 25 years. Thistransition can best be describedas controlledtransition as the state graduallymoves from a highlycentralized state planningsystem to a free marketsystem Due to the failure of changesin the 1970s,a new roundof economicchanges was launchedin mid-1979under the slogan: 'Adjustment,Reform, Order, and lmprovement. Even thoughcollective agriculture remained the basis, these changes moved away from a 'formalized' administrative managementand regulationsto "managementsystems" based on local conditionsand economics. The draft constitutioncalled for a fundamentalchange in the communestructure, the main purposebeing to segregateeconomic decision-making and governmentadministaion. Supplyand managementcoopera- tives were establishedwith the sole purposeof purchasingcotton. Theproduction responsibility system in which peasanthouseholds assume full responsibilityfor task completion,but generallywork under conditionsof unified planting, plowing and plant protectionproved successfidin increasingwork enthusiasmin Shandongand Henan. This cooperativeventure gradualy spread to other provincesas communeswere generally disbanded.

Commencingin 1979,the governmentallocated production quotas at a nationalceiling price with any overquota quantitybought by the publicCotton and Jute Corporationat a higher"negotiated' price. The quotasprior to 1984/85were basedon averageproduction between 1976 and 1978. lhe base price was raised 10, 15, and 10 percentin 1978, 1979,and 1980respectively, which was much higher than worldprice increases. In 1984/85a newpurchasing system was implemented with Central region firmers receivingthe baseprice for 60 percentof productionand a negotiatedprice on the remaining40 percent. In the NorthernRegion, farmers had receiveda five percent subsidy on all production. The new regulationscalled for the baseprice to be paid on the first 20 percent;the negotiatedprice was paid on the remaining80 percent. Variousforms of grain bonuseswere in effectfor both 1983/84and 1984/85. In Hubei, for example,farmers receivedtwo kiograms of grain for every kilo of coton producedin 1983/84and 1.5 kilogrs of grainfor everykilogram of witin grade seedcottonproduced in 1984/85. Grainbonuses were eliminted in most areas ater the record 6.3 millionmt productionof 1984/85but fertilizerbonuses were introduced.Bonus schemes which vary frm provinceto province,have been in effectsince then.

The AUChina Federation of Supplyand MarketingCooperaves, a Ministryof Commercepublic enity, purdcases,gins, transports,and storesseedcotton in additiontD supplying inputs. Management practicesdiffer betweenprovinces and in some instances,management is centralizedwhile in others, managementoccurs at thelocal level. After a nationalprocurement price for seedcottonis established by the state, the cooperativessign approximately60 milion contractswith growers. These conacs stipulatethe area, variety,and inputsas well as the ninimm seedcottonquantity to be deliveredand the purchaseprice. Farmers are sometidmesgrouped into smallunits. Local cooperatnvescan advanceup to 15 percentof the state purhase price. About70 percentof the cottoncrop was ginnedby supplyand marketingcooperatives in 1991.

The Hubei Cotton Corporationis an exampleof a body that is sordnate to the Hubei Federationof Supply and MarketingCooperative. The corpontionhas nine sub-its at the prefeue level, 50 at the countylevel, and over 1900 cottonpurhasing stations. It operates246 gioneries,a - 13- syatm of warehouses,undtrasportation ecpipmfe It purchasessesiotton, provids crodit, plant ed md ubsldizedinputs nd run fieldtrils, thermsult of wbichae disminatedto frmers. Cottons hand-pickedand packed In sak whichae takento procurementstton by cut whore thy e weighedsampled and rded. A three-digit r systems usd Ocldify thelnt wih th flt digitdesignaing th gradeand the sond midthird digis designatingthe len in mm. Historically,exports were handled by thestate agency, CHINATEX, but slectedprovinces e nowgiven more autonomy.

CeNra Asia(Uzbekistaa) Cottonis the mostimportant crop in Uzbekisun(described a a cottonmono-culture) ad oneof the mostimportant crops in Turkmeniaand Tujiiklsan. It is alsogrown In Kazakhstan,Kyrghyzstn, Azerbajan,and Kirghizia. However,civil wars ae contributingto produciondeclines in both Azerbaijanand Tajikistan. Since Uzbekistan produces around two-thirds of FSUotton andTurkemistan produce roughlyone-sixth of FSU cottononly cotton production policy In Uzbdest is disud in dtil In thisscdio. Ihe policiesof thesetwo states very simiar wtSh e majorexception being that cotton export marketing in Tur an is handled by a singleostate agncy, TURKMENPAKHTAEXPORT. Thecotto areain Uzbekdstanpeaked at 2.1 millionbectares in 1987,when it occupied47 percen of hetotal igatedauea of 4.5million hectares. Dueo val oncern, th highwater us of coton,t neodto producegrain, and the attempt to maintainyieds withcrop rotati, theara dropped to slty over 1.6miion hectaresin 1993. Thelong term goal is to maintainthe ottonarea at around 1.4-1.5million hecas and attainlint cottonproduction of arud 1.5 millionmt by increasingthe yield. However,in the short term, emphasiswill be placedon maintaininproduction nl in the absenceof yieldincrse, thisarea is likluyto be maintained.

Priceincreases as incentivesto prmote productionand/or increase efficiency hawe been non- eiteon Stateproduction orders, higbly ssidized fixed input prices, and fixd oput pries dermi artificialprofit. Theproduction order is in theform of a productionquota with a specifedarea, variety andinput level furnished by the State. Wateris suppliedfree. Whencollective frms meetor evenfall sbortof thequota, there is no incenveto scrapthe cottn remain in thefield. Consequently,thesta nds factoryworkers and stdents to harvestthe remaining crop. Severalobservatio have been made regaring the quantityof cottonleft unharvestedin the fieldwhich rawe fromclose to noneto as high utepercnt

Thegoverment is attmptingto inoduce marketincentives into th systemin a limitedfahion Mh amountof cottonthat can be marketedby thecollective farm subject to an exportlicense has icreased to 5, 15, and 20 percentrespectivey in the past thr yeas. However,this only appliesif th quot is metand exports are subjectto a taxif proceedsare notused to purchasehard currencyhputs. his renslt in districtcotton authoritiessdling thoub severalstate entities,the largestbeing UZAGROICMEXIhe questionof allocationof theseproceeds to theindividual worker thgh wa or in the form of bonsesto managementis largely unanswered. It appeasta the hardcurency proceedsgo to thecollective farm, firsdy for capal investent, andsecondly to improvete welfiar of to collectivefarm asa whole. - 14- Cottonmarketing in Uzbekistanis both for barter and cash, and 'fragmented and apparentlynot coordinated. There are three layers of government,presidential or executive,ministerial, and sub- ministerial,involved in marketing. The major executiveand ministerialsales are barter, while sub- ministerialsales are for the collectivefarm's shareof output(now twenty percent) and are generallyfor cash (roublesor hard currency),which is used to purchasehard currencyimports in order to avoid the exporttax. Thesethroe distinctmarketinig levels are apparentlynot very well coordinated,even though the sub-ministriesmust obtain an exportlicense from the Councilof Ministers. All sales depend on shipmentorders from UZKHLOPKOPROMSBYT. Decisionson cottonmarketing are madeon a quarterlybasis, the quarterlyshipment orders by ginnery, grade, and buyer being regarded as 'State Secrets." These orders originate in UZKHLOPKOPROMand are transmittedto the regionalcotton offices and ginneriesalong with the percentagesof each grade to be ginned. The buyers of Uzbekistancotton are notifiedto report to a regionalcotton office on a specificday, where they are given orders to inspectspecific lots at specific ginneries. Buyersoperate on a day-to-daybasis withoutknowing the area or quantitythey will inspect. The variety is never knownunless the buyer has independentdata on varieties. Only inspection,and resultantacceptable or rejectionlot-by-lot is permitted. Pre-1991, marketingof Uzbekistancotton was the responsibilityof the USSR State Agency, NovaExport. This agency establishedbarter agreementswith EastemEurope, other socialisttrading partners (Cuba, Vietnam and N. Korea) and the USSR republics. Excess cotton was sold in hud currencyand amountedto around200,000 mt annually. No paymentwas madefor exportsto Eastern Europe and other socialist countries, Instead Uzbekistanand other Central Asian cotton producing republicswere allowedto accumulatenon-convertible currency credits for the procurementof itemsfrom a list of selectedgoods which were rarely avaiable. Since all gods flowedbetween USSR Republics, it is difficult to ascertain whether or not the trade flow was positiveor negative for Uzbekistan. However,Uzbekdstan received 60 percentof the proceedsfrom these sales in hard curr.encyand these receiptsare easierto analyze. Fineswere leveled in hard currencyif the cottonshipped to the ports was inferiorto sdected specifications.This probablyresulted in ginneriesbeing able to producea specific fiber gradefrom variable seedcotton lots, a processthat continuestoday. Generallyspeaking, the grades exportedto odter Republicsor to soft crrency marketswere inferiorto thoseto hard currencymarkets. Selectedcountries, ;n particularHungary and to a more limiteddegree East Germany,developed the abilityto receivecotton in excessof spinningneeds and to sellthe top gradesfor hard currency;a process knownas creaming.

Ihe currentmarketing system involves both barter and cash,barter agreement with former USSR Republicsreportedly involving primarily grains, oil and fertilizers,and barters with internationalcotton merchantsinvolving grain in additionto barters for steel with a Koreanfirm. Since the valueof grain is fairly well established in internationalmarkets price discovery(whether or not hard currency denominated)is probablyfairly efficient. Barterswith the former USSRrepublics are another matter entrely. Obviously,this exchangeis mutuallybeneficial from the viewpointof cost due to the low transortation cost that is fixed in terms of roubles. The questionof non-performanceof tradingpartners is anotherquestion entirely. The cashsales made to inteational merchantsalso generallyinvolve barter since they are subject to an export tax if hard currencyproceeds are not used to purchaseinputs. Iput needs of certain industriesare reportedlyassessed and cottonis allocatedfor sale in US$, the proceedsto pay for hard currencyimports. At present80 percentof the cottonquota is soldunder state order withthe remaing 20 percenttheoretically sold by Districtor OblastAssociations representing collective farms, assuming -is - there is no shortfall in production. Since the associationshave no marketing expertise, several govermnententities, primarily UZAGROIMPEX, handle sales for a two percentcommission, or in some instances$10/ton. The collectivefarm is free to use the remainingproceeds as it sees fit, subjectto the exporttax. However,the most commonutilization is apparentlyto financehard currencyimports.

Cotton ginning in Uzbekistan comes under the Republ.c Production Amalgamation (UZKHLOPKOPROM),while cotton Standardsand Classing (SIFHAT)comes under the Republic ScientificEnterprises (NPO) division of UZKHLOPKOPROM.Seedcatton is deliveredto collection centers,where it identifiedby varietyand dividedinto four gradesbased on trashand moisture. Payment is basedon net weightadjusted for both. The cottonis transportedfrom collectioncenters to ginneries where it is stored in singlevariety, single grade stacks weighingup to 450 mt each. The stacks are coveredwith canvasand can be aeratedthrough a tunnelin order to controlmoisture. The ginning seasonextends for ten months,but highmoisture stacks are ginnedfirst and seedcottondeterioration does not appearto be a significantproblem. The large, singlevariety, singlegrade stacks ensure long runs of up to 750 bales of homogenouscotton.

Egypt

The Egyptian cotton industry is a study of an industry that went from liberalizationto nationalizationand is now in the process of movingtowards "privatization.' The CottonExchange in Alexandria(Meni El Basil),established in 1861was the oldestin the world. It was initiallyclosed from November1952 to September1955 and a committeewas formedto performits previousfunction. The cotton exchangewas finally closedand the partial nationalizationof the CPMCscommenced in June 1961. The EgyptianGeneral Cotton Institution was established in 1961/62to superviseginning, spinning, and exporting. The GeneralInstitution was abolishedat the end of 1975and replacedby the Supreme Councilof Cotton Sector. At the end of 1983, the Public Sector Authorityfor Cotton Affairs was established. Under the hypothesisthat the margins charged by the private sector were excessive,the cooperativesystem of marketingemerged in 1962/63in El Menoufiand spreadin phases from 1965/66.

Phase 1: Villagemiddlemen were eliminatedas collectioncenters were established.

Phase 2: As cooperativesbegan the purchaseof cottondirectly from the farmersat collectioncenters, the raw cottoncounty merchants and buyerswere eliminated.

Phase 3: The cooperativessold the cottonto the exportingcompanies who received a commissionfor supervisingthe spinningoperation.

Phase 4: MenoufiGovernorate performed its own spinningand sale of yarn to the Egyptian Cotton Commissionand cottonto the Export companies.

Cotton is known as the 'Government"crop since planting was forcedprior to 1993/94, and numerousministries are involvedin the cottonand textile industry. The Ministryof Agriculturaland Land Reclamation(MALR) sets productiontargets by varietyand Governorate.The Governorate,in turn, requiresprimarily firmers in districtsin cottondesignated areas more than 12 kn from Cairo to plant one third of their landto cotton. Theplanting requirement was discontinued with the 1993/94crop. - 16- The procurementprice is set by the MALRafter approvalby the HigherPolicy Committee that represents severalministries. The MALRalso providedcredit and subsidizedinputs through the PrincipalBank for AgriculturalDevelopment and Rural Credit (PBDAC).This process continues,but subsidieshave now been eliminatedan all inputs exceptwater and pesticides. The 31 spinningmills are controlledby a holdingcompany, the TextileIndustries Corporation (IMC) under the Ministryof Industry(MOI). Since 1990/91the Ministryof Treasury(MOIr) has pickedup the differencebetween the procurementprice for cotton plus ginning and transportationcosts and the cost chargedto the mills for raw cotton. The Mi.istry of PublicWorks and WaterItesources provides free irrigationwater but chargesfor the fuel cost fo' irrigationpumps. Currendy,the Egyptian CottonAuthority (ECA) under the Ministryof Economyand Foreign Trade (METT)has a monopolyon marketingand distributionand incorporatessix Cotton Procurement and MarketingCompanies (CPMCs), five ginning companies, and one pressingcompany. In late autumn, the six CPMCs and the ECA meet and fix prices for export (so-called "administered"pricing), determinethe export allocation,and determinethe allocationfor domestic consumptionand imports. Importshave to be vacuum-fumigatedbefore arrival in Egypt, essentially restrictingimports to Far WesternU.S. growdts,the only area with these facilities,and are limitedto non-cottonproducing area mills in Alexandriaand Suez, althoughimports were admitted, Kafr El Dawar in 1989/90. After export purchaseorders are received, exports and imports, when announced,are equallyallocated to the six CPMCs. The MOI requestsa specifiedquantity for each of the 31 mills which is equallyassigned to the six CPMCs. The two Law 33 (private)mills makea separaterequest to the ECA whichassigns the quantityamong the six CPMCsaccording to quantitiesand types eachhas produced. Paymentis madeby the millsupon receipt of the cotton,the shortfallin pricesbeing assigned to the MOA. Scartois sold separatelyfrom gradedlint, mainlyas stuffingfor mattresseseither on the free marketor by the Ministryof Supplyat subsidizedprices. At the villagelevel collectioncenter, the CPMCsclass and grade the cotton,paying the farmer within48 hours. After this, the CPMCowns the cottonuntil it is deliveredto a spinningmill or sold for export. Ginningcommences in Septemberat 65 singlevariety ginneries, and, by law, mLustend by March 31. The ginneies are completelycetalized, do not competefor cotton, and are owned and operatedby ECA's five ginmingcompanies. An individualginnery may work for more than one of the six CPMCs.

The seven monthginning seasonand relativelyshort harvest periodresult in some seedcotton being stored in the open for two to three months. Ginnedcotton is packedin flat bales of approximate eight metric cantar(m.c.), but bales from differentCPMCs are not mixed, which are either stored or blendedand repressedin 6.53 m.c. bales for exportsale on privatetype. All storage facilitiesfor the CPMC's are at the pressingcompany. The Ministryof Agriculturekeeps the premiumseed for planting the next cropand deliversthe remainderto the processingplant for crushinginto cottonseed ofl and meal.

Nationalizationof cottonproduction in Egypthad a detrimentaleffect on yield and production. The adoptionof administeredprices for Egyptiangrowths were too high relative to possiblesubstitutes and farmgategate prices too low relativeto the price of competingcrops. This resulted in declining productionlevels from 1980181until 1991/92and exportsupply uncertainty which, when coupled with the highexport price forEgyptian ELS and LS cottons,resulted in bothdeclining demand and encouraged the developmentof competingforeign export cottons which competewith Egyptian ypes. - 17 - Failure to establisha frmgate price whicb wa competitivewith alteraive crops, especally Berseemclover, resultedIn delayedplantins, diversionof subsized nitrogenfrtlizers scheduledfor cottonto more profitablecrops, cottonleft unharvesteddue to the economicsof secondand third picks, and a generallack of correctapplication of Inputs. Currently,the farmgateprices are set at a percentageof the flve-yearaverage of the iotatonal pricesfor Egyptiancotton. However,in four of the previoussix years, the administeredprices were set to maximizerevenue so this price igores the relativeworth of Egyptiancotton to tie spinnerard covers too long a period, thus preventingtrue retail marketsignals from reaching the farmer. Consequentlyt farm level prices in the future are likely to be set at a minimumlevel consistentwith the desired productionlevels of differentvarieties, their spinningvalue, and overal Egypdanbudget constraints.

Category 3: India and Paksta

Pakistan

In Pakistan,cotton and texle productionand trade are directly influencedby the Government Cotton productionhas been primarilyinfluenced by the supportprice, which has reducedrisk and by technologicaladvances in crop protectionand the developmentand distributionof improvedvarieties. Seedcottonsupport prices have been in effect since 1976177.The farmer sells to the Governmentif pricesare less than the supportlevel or to the priva trade if the marketprice is higher. Duringthe S8s, the percentageof qualityseed used increasedby four to five percentper aann, reaching82 percentin 1985/86,and plant protectioncoverage has dao inmased. Thesetwo factors accountfor mostof the increasein yield. Productionhas also been influencedon the inputside, by subsidiesamounting to about three US centsper poundof liuL The major subsidizedinput has been credit, in the form of interestfree loans of up to 10,000Pakistani Rupees, which are made availableto small farmersby the Agricultural DevelopmentBank of Pakistanand by the Comercial Bank. Ginnersalso providecredit facilitiesto permanentcustomers. Private agenciesand deales supplyfertilizers and pesticides.

The research oriented Pa dstaCental Coton Committee(PCCC) was establishedby the governmentof Pakistanin Karachiin 1949with multiple objectives of improvingthe growing,marketing, and manufactureof cotton. Sub-committeesscrudnize and monitorresearch sanctioned by the PCCC. The PCCC has researchinstitt at Multinin the Punjaband Salnrad in Sind that carry out fundamentaland appliedresearch in al disciplies. Researchstations also exist at Ghpoti in Sind, Sahiwaiin Punjaband D.I. Khanin the NorthwestFrontier Provie with sub-stationsin all provinces. Seed corporationsexist in both Sind and Punjabwith PCCC providing fimds for the productionof Nucleusseed at Mutan and Faisalabadin Punjaband at Tandojamin Sind. Tbis seed is releasedfor multiplicationand distributionto growersby provincWseed corporations.

Ginneriesare ownedby the privatesector. A few factoriesare operatedby the publicsector on a lease basis.

It is necessaryto reviewthe old Patani cottonexport policy in order to understandthe current policy. The Governmentmonopoly on exportsteminated in 19BBwhen the CottonExport Corporation (CEC) was abolished. With this e, two importantprices were intoduced to controlexpors and - 18- establisha cottonprice for Pakistanispinners. The MinimumExport Prlce (MEP)represes the cheapest levelat which Pakistanicotton can be bought, and Is the onlyvalue that affectsthe itratonal cotton market,and the Benchmark(BM), which is the maximumItrnal price paid for cotton. The MEP is set daily (in a manner similarto the AWP in the UnitedStates), wbile the BM is generallyset for each season,but can be altered. The exportduty is calculatedas a percentageof the differencebetween the BM and MEP. However,this percentageis variable,as demonstratedby the rates for Oct '91 of 100 percent,Nov '91 - 90 percent,Dec '91 - 75 percent,and Jan '92 - 60 percent, a rate that appliedthrough the changein policies. The new crop MEP is typicallynot announcedunil December,hence, expotes cannotforward sell new crop cottonwithout using the New York FuturesMarket, and domesticbuyers have first option on new crop purchases. The new crop MEP is normallyset relativeto the old crop MEP to move old crop cottonfist.

In August 1992,Pakistan's Economic Coordination Committee approved a major changein th 1992193cotton policy. The benchmarksystem for calculatingexport duty was abolishedand a duty wau leviedon MEP above45.00 centsper pound,with incrementsof two centsfor each cent abovethat level. The old export duty was essentiallyreplaced by an exporttax that is set as a progressivebenchmark, which is applicd to a rising export price above a benchmarkMEP, with a constant ginyard cost subtracted. The ginyardprice canbe increasedto keep farmershappy and the new variablecan be set at 100percent. The benchmarkMEP under this regimeis 45.00 cents per pound (861 rupees/maund- equivalentto 1.32 kilogramsof seedcotton),a three cent increasefrom the previousBM, which was 42.00 cents per pound (800 rupees/maund). The new stucture stabilizesthe internalcost of cottonin Pakistanand in the case of rising prices, the duty keepscotton in Pakistanfor domesticconsuaptio. The new policydoes not definethe impactin a depressedmarket, i.e. whenthe MEP is lowertha the benchmarkMEP, in which case the tax rate would be zero and no duty would apply to exor. However,the duty is still a variablelevy which canbe changed,if needbe to help move cottonor keep it in the country.

Obviously,the subsidizationof the Pakistanitextile industry gives Padistan a large comparative advantageover other spinnerssince about 50 percentof the yam cost is accountedfor by cotton. Ibis is reflectedin the explosionof yam exportsfrom Pakstan, which incsed from 292,253,000kgs in 1988189to 502,672,000kgs in 1990/91.

India

India managesdomestic cotton prices to increasetextile production and employsa supportprice for farmers. The supportprices of two basic varieties,F-414 and H-777, for the mediumstaple group and H4 for the long staplegroup, are establishedby the Governmenton the recommendationof the Commissionfor Agricultu Costs and Prices. Supportprices for other majorvarieties are also fixod by the Government,based on the recommendationsof a Committeeconsisting of the TextileCommission- er (Chairman),the Chairmanof the Directorateof CottonDevelopment, and the Chairmn of the Coton Corporationof India (CCI).

Somesubsidies are givenfor the variouscomponent schemes of the centrallysponsored Intensive CottonDevelopment Program. The cost of major inputsfor demonstrationsand cultivationexpenses fr the productionof Breedersand FoundationSeed are met by the scheme.

At the farm level, CooperativeCredit Societies,Cooperative Commercial Banks, and State AgriculturaDepartments generally provide finacing, althoughin someareas privatetraders may finance - 19 - the crop. CooperativeCredit Societies obtain funds from Stats CooporaiveBano which,in r, obWan funds from the NationalBank for Agriculturaland Rurl Devdopment.

Most of the ginneriesare individuallyowned, althougha few me textilomill owned. In some areas, Gujaraat,Maharashtra, Tamil Nadu, Punjab, and Karnataka,gineris ae cooperative arm entities.

India employsa mixed cotton procurementsystem. In Mahashtra, the Maharahtr Stt CooperativeMarketing Federation, a public sector entity, purchases al the cotton while ginning companiesgenerally purchase the cottonin the other states. In a few instan, the txtile mils ad privatetrade may purchasethe cotton. The CCa, a publicsector entity, prvides price support in other states and purchasescatton for the NationalizedTextie Industry. Untl recenly, the private trade wa only involvedin the exportof AssamComilla, yellow pickings, and Zoda. All otherexport activity ws handledby CCI, the Maharashtracooperative, the Gujarat StateMarkedng Federation, and other sto marketingfederations. Exportquots and Mimum ExportPrices are set by tho Governmentand .I* are by tender.

Forwardsales are permittedin all of India exceptPunjab, Haryana, Rajasthan,URP., ad the UnionTerritories of Dehli and Chandigarh. Contractsare generallybetwee the farmer and ginneror a privatemerchant. They are non-transferableand are governedby the ForwardContracts (Regulation) Act, 1952.

Sources of lInfonrmtion

The informationin this chaptersummarizes and updatessections of TheWorid of Cocoa Dl and Gillham1989), and the followingICAC documents: (1) Atachnent II to SC-N-390(lune 9, 1992), BackgroundInformation for ICACDiscussion of the Comitiveness Provisionsof t US FarmProgram on World CottonPrices, (2) AnachmentIV to SC-N-391(Sept 8, 1992),Backgrud Informaionfor ICAC Discussionof the Impact of Inea Policieson Iternational Cotton Prices and the Spining Industriesof CottonImporting Counties, (3) Attacme VI to SC-N-396(May 6, 1993),Backgmod Informationfor ICACDiscussion of CottonPolicies in China(Minland), (4) BackgroundInformation on the Productionand MarketingPolicies of CottonProducing Countries (May 26, 1993), and (5)Cotton ProducdonPolicies in Cent Asia,article oontainedin Cotton:Review of the WorldSiation, May-Juno 1993,and two unpublishedarticles (Bell 1992 and 1993). Other infonnationused wasobtained directly from the countries. Conclusionsin this chapterare ten from the abovereferences. The appendixon U.S. cottonpolicy is takenfrom a forthcomingbook (Bell and Gilham 1993). 4

Cotton Production

Conditions Required for Cotton Production

Cotton is a long-seasoncrop, requiring a minimumof 180 to 200 frost-freedays. Climatic factors dictate the areas where it can be grown successfully. Cotton needs over 160 days with temperaturesabove lS°C and adequatesunshine during the growingseason. Temperature,sunlight, water, and nutrientsare importantelements for obtainingacceptable yields (Waddle 1984).

Cotton cannot withstandwaterlogging, but almost any soil with reasonabledepth and good drainagethat is suitablefor the productionof other field cropscan be used for producingcotton. Cotton does not do well on extremelysandy soil unless water and nutrientsare adequate,and on these soils, specialpre-planting preparations with addednutrients may be necessary.

Cottontolerates moderate salinity levels in the soil or irrigationwater, provided waterlogging is not a problemand drainageis adequate. The crop requiresat least 50 cm of water providedby rainfall or irrigationduring the growingseason. Cottonis sensitiveto early seasonweed competition and in most areas is subjectto attackby variousinsect pest speciesover much of the season.

Impact of Yield on World Cotton Productlon

The rapid and considerablerise in world cottonproduction since the early 1960shas resulted mainly from increasedyields which rose from an averageof 443 kg/ha in 1981182to 595 kg/ha in 1990/91(Fable 4.1). The harvestedarea of cottonremained fairly constut, at approximaely33 million ha duringthe sameperiod and has fallento slightlyover 32 millionha for the 1992/93and 1993194crop years (Table 4.1). Continuousresearch on plant breedingand seed multiplicationhas resulted in improvedseed qualityand the availabilityof more productive,higher-quality varieties for commercial planting. The wide use of fertilizers,improved insecticides, and the use of geneticallypure certfied seeds of improvedvarieties have contributedto the steady increasein cottonyields. Yi',ld increase through conventionalbreeding has slowed, but constraintsin availablearable land require that more efficientand more productivegenotypes be developedto ensure further advancesin production. Tbe introductionof hybridvarieties is limitedby the problemsand costs of seedproduction. So far, mutation breedinghas had little success,and geneticengineering is directed toward specificcharacters that are likely to have greater impact on productioncosts in the immediatefuture than on direct yield improvement(Meredith, 1984, p. 136).

Production

World cotton productionfluctuates due to a multitude of factors includingenvironment conditionsin ihemajor producing countries. Seasonalvariations in yield are largelythe result of the impact of environmentalfactors on time of planting, seasonaldistibution of rainfall, and harvest conditions. Sowingand harvestingtimes are determinedby the agr-climatic conditionsprevailing in individualcountries. Tabb 4.1. Wodd Cadfo. Hansed Atta, YeUd,P nio, gm C _mnno,19611 - 1993194

|19812 19121 1983134 19|415 1915M 19167 1917188 19U819 19990 1990191 199*192 11993 _1

. veCd3Am 33.142 32,190 32.104 35.039 32,6031 29,331 31.312 33,672 31,5 33,033 34,32 32,415 323J6

Lin1Yid(k Xh)/ 443 4S0 451 549 534 521 555 544 SS2 576 595 559 S93

PhaduedonC' km) 14,996 14,472 14,49 19,239 17,393 is52 17,651 13,329 17,316 19,014 20,793 1l,I1S 199

Caa.uzapdauCM to" ) 14,104 14,459 14,661 15.112 16.S66 1.,253 1311 11,511 12,776 13,736 134 13,629 19,359

. ShlftInwkWdue(ahWiaand kIgaa ,' P. PzUIia F. Fenom

&mu.: ICAC )92.: 04Z7 19M.k 47. Oam1992: Vol 46 lb. I Man MJ 12-19; 1993s:12-19. -23 - Elgure 4.1.

WORLD COTTON PRODUCTION MEUUonTans 25

20-

15 -

10

IB51 EKYB 70171 8s4Bi 9011l

s 1-Ir4C I99k FJef 4.2

WORLD'COTTON AREA Eflan Hscts 40

30

20 -

10

@l~~...... I..t. . 50151 6011 70171 60161 90111

.b' MICCJj9k - 24 - Figure 4.3

WORLDCOTTON YIELDS Kilograms/Hectore

600 F

5001-

200 I s505 60161 771 ow1l 9013

Shi in tiw klv fi6m 1984S dw pfizm?UyID Ids ma Pai_u Soure:ICAC 1993c

Furtherexpansion in cottonproduction will contnue to dependprimadly on yield increasesrather thanon acreageexpansion. Datashow that in the 1980sthe worldcotton grow area was no greaterthan duringthe 1950s. For example,world average hased areawas 33 millionhectares in the 1950s,and 32.5 millionhectares in the 1980s,as the averageproduction increased from 9 milliontons to 16 million tons (CottonWorld Statistics,ICAC). However,difficulties have been experiencedin raising cotton yieldsbeyond current ceilings using conventional means in mostof the majorproducing countries. With limitedarable land, and competitionfrom food crops, productionhas fallenbelow consumptionin some cotton-producingdeveloping countries (e.g. Egypt and Mexdco).Weather vagaries and low relativeprices that have reducedplantings have had the same recessionaleffect in several countries (e.g. Brazil and CentralAmerica).

Worldcotton production increased from 17.4 millionmt in 1989/90to about20.8 millionmt in 1991J92,while consumptionranged from 18.8 to 18.3 millionmt during the same period (Table4.1). Despitelimited land availability,the increasein cottonproduction in 1993/94is expectedto result from a decreasein area of arund 1.3 millionhatothe lowestlevelsince 1989190and an increasein lintyield from552 kg/ha to 595 kg/ha during the same period (Table4.1).

Some major developingcountries, e.g., China, Egypt, and Uzbekistan,in which cotton is economicallyimportant, may have to reducetheir cottonarea overthe next decadeto producemore food to satisfythe increasingfood demandbrought about by highpopulation growth rates. It is import that the area reductionin these countriesbe offset by increasedyields to maintaintotal production -25- Varieties

Cotton has wide variabilityin te fiber characteristicsof length, length uniformity,strangth, maturity,and fineness,which constitutefiber quality. Fiber length, fineness,and strengthare largely geneticallycontrolled, with limitedinfluence from the enviromnent. Environmentexerts a considerable influenceon fiber maturity,whereas length uniformity,particlarly for short fibers, is dependenton ginning conditions. Thus, variety is the major determinantof fiber type and quality,which, in tum, determinethe end use. In the Englishsystem, yam finenessis expressedas a yan count, the number of 840 yardhanks per poundof yarn. Thus, the higherthe countnumber, the finer the yarn. High-count yarns require longer, finer, and strongercotton fiber than do low-countyarns.

GossypiwnSpecies

There are four cultivatedcotton species, the Old World species Gossypiumarborewn and G. herbacewnand the NewWorld species G. barbadenseand G. hirsutun. About90 percentof the world's commerciallyproduced cotton comes from G. hirswna varieties,also knownas Uplandcotton, and about 8 percentcomes from G. barbadensevarieties, known as Egyptianor AmericanEgyptian (Pima) cotton. The balancecomes from Old Worldspecies, known as Desi cotton,grown mainly in Southand Southeast Asia and China.

G. hirsum. Uplandvarieties vary in staplelength, strength,and fineness.They are broadly characterizedas coarseand medium-finecottons with the top end of the crop designatedas extra-fine cotton. The coarsecotton is generallyshorter and coarserand accountsfor a decreasingshare of Upland cottonproduction. It is used mainly for coarse-countyarns for coarse fabrics, muslin, canvas, and denim. Medium-fineUpland cottons are longer and finer and accountfor most of the world cotton supply. They are used to producefiner-count carded and combedyarns below 40s count, for use in a wide range of lighter-weightfabrics. Extra-finecotton is used to produce combed yars above40s countfor use in higher-qualityfabrics (Coleman and Thigpen1990).

G. barbadense.Egyptian and AmericanEgyptian varieties are commonlyknown as ELS and LS (See Glossary)cotton and includeSea Island,Egyptian, Pima, and similarcottons grown in India, the formerSoviet Union (FSU), and China. The cottonlint is long andfine and is used mainlyfor producing combedyarn of 80s countor more for use in the manufactureof high-qualityfabrics and sewingthread. This cottonhas the highestvalue per unit weightbecause of its fiber length,fineness, and strength,but yieldsare lower than thoseof Upland cotton.

G. arborewnand G. herbacewn. Old Worldvarieties are nativeto Asia, wherethey have been grownfor centuries.The fiber is short and coarseand is used mainlyfor coarseyarns for heavierfabrics and muslinand for such productsas felt, upholstery,and absorbentsurgical cotton wool. Thesevarieties are still growncommercially on a limitedscale in Southand SoutheastAsia and in China. They are also grownin someareas as a backyardcrop for home industryuse. -26-

IntegratedPest M(1M Cottonproduction costs have incraud significandydue to the increasedwe of fertilizrs d chemicalpesticides needed to achievehigher yields and economicgains. In many cam, die harmed use of pa;ticides and the neglectof oher pest controlmeasures have created new problem in oct control by diminating natural enemies (pedators and parasites) and causing increasedinsetcide restne in major cottonpest.

Evolutionof 1PM Frisbieet al. (1989)indicated that Smith(1971) provided an orderly analysisof the evoluatioof ctton productionnhawi. The first, or bsuistec, phaseis wherelow-yielding cotton is grown, usualy underraifed conditions,with few inputs. In this phase,the cropis protectedby inherentplat restae and by the natural enemies of major insect pests. The second, or qpokaton, phase may be characterizedby new irrigationschemes where higher-yiddingvarieties, often withpoorer natal bost plant resistance,are grown. Fertilizersare used, and insectcontrol is basedentirely on chemicalsaplied on a fixed schedule. Initally high yieldsare obtaned, but after a few years, the third,or atisi, phue is reached,when increasingamounts of pesticideare needed. Pests becomeresistant to pestckid, and new, previouslyurimportant pests become damaging because of the eliminaionof naturalenemies. This analysisis empircallyconsistent with the neoclassicaleconomic theory in which yieldsand total oupout may decreaseas more inputsare addedwith the movefrom the secondstage of productio to th thid stage, and the marginalproducivity of inputsbecomes negaive. This process gives rise to the fowdt, or disaster,phase, whencosts rise to a point where productionis no longerprofitable.

Thiscycle has beenrepeated in many areas and has resultedin increasingawaeness of the need to developintegrated pest controlstategies involvingcultural, naral, biological,and chemicalcontols, ported by legislationwhere necessary. Tbe culturalpractices include adequate crop roato, seection of pest-tolerantor pest-esistt varieties, the use of appropriateseeding rates, timely plant, and optmumuse of fertilizersaud irrigation.

EPMin any cropis a cropprotection system that aimsat achievinga sustainableicase in crop productionwith no adverseeconomic, e, or healthconseences whileprotetn the crop againstpests and weeds at causesignificant yield losses. This requiresthe developmentof apropriate pest control measuresand the judicious and efficientuse of chemicalson the basis of a twrough knowledgeof the key biologicaliteractions of specificagro-ecologies to obtaina compartive advantage over the long term (Srivastava1991).

C G,oem of 1PMSystnms Chinais one of the leadingdeveloping countries in whichIPM systems,particulaly for coton, have been developedand are being applied. The ChineseCotton Research Institute (CCRJ) has broken the IPM system in cotton into technical, decision-mang, monitoringformadonal, and extension subsy-m.

Techial. The technicalsubsystem is the core of the IPM systemand indudes:

1. developmentand use of disease-and insed pest-resistantvarieties; -27 - 2. incorporationof the culturalcomponents outlined above, involving manipulatn of colom productionto xvoidor reduceinsect infestations and to make the crop more producdve and profitable; 3. developmentand applicationof pest/predatoreconomic thresholds;

4. augmenationand protection of naturalenemies of ins pestsby rearingthem for relne and by judiciouslyusing chemicals,e.g., biopesticidessuch as BacdUwdurlngless, selectiveor botanicalinsecticides such as the extractof Neme rees, and fungicides; 5. establishmentof a seed supplysystem for disease-freeseed of resistantvarieties;

6. seedtreatment to removelinters with sulfuric or hydrochloricacid and seeddressing with systemicpesticides.

Decision-making.This subsystemis supportedby plant protectionspeciaNists from CCRI and local extensionspecialists. Thesespecialists make decisions and manageimplementation and folow-up with technicalinformation from the monitoringlinformationalsubsystem.

Monitoring1n,foomrdonal.This subsystemincludes technicians from villages, towns, and couts whomonitor the current statusand conditionof pests, beneficialinsects, crops, and weatherand provide the decisionmaking subsystem with fill, ur'ated information.This information is used to initiateacton and activitiesdta are undertn by the eension subsystem.

FUension. This subsystemundertakes actions and activitiesinitiated by the decsion making subsystemon the basis of informationgathered by the monitoringsubsystem.

These subsystemshave been integratedto form the cottonIPM system. The idifiatof controlmeasures, however, requies the availabilityof sufficiet, location-specificdata on pest spes, their population dynamics and biology, and their natural enemies. Ibis information which is required by the crop protectionspeciist to designspecific cotton IPM tecmiques, is ofte not availableand is a imitng factDorm developingIPM programsin mostdeveloping counties.

Host Pln Resistance

Plant breedersform an integralpart of interdisciplinaryteamwork in developingIPM systems The developmentand release of insectsistant varieties (host plant resistance)reduce the need for pesticidesand thus improvethe profitabilityof cotton. Hairy-leafvarieties developed in ndia d Affica have formed the main control measureagainst the jassid (Empoascaspp. or Amrascaspp.), a serios early season,leaf-sudkig pest foundia manytropical cotton-gowing areas. Great successhas also been achievedin many countriesin developingbacterW blight-resistant varieties.

Despite a considerableamount of work, progresshas been limited in developingresistance to major pests such as the whitefly, Benesia tbaci, and the bollworm,Hellods spp., often becausethe dharacterproviding resistance has an adverseeffect on someother plant characteristic.As an example, leaf hairinessprovides effictive resistance to the jassidbut makesthe plant more susceptibleto whitefly and camot be used in areas where cottonis mechanicallypicked because the leaf hairs inhibit efficient -28- deaning, leadingto downgradingof the lint. An increasein gossypol,a pigmentfound in the glandsof cottonand relatedspecies, can increaseresistance to bollwormbut is often associatedwith lower yields, and the high gossypolcontent in seeds increasesproblems in producinghigh-quality oil and cake.

Aechanlcal Crop Protecton

In Egypt, the leafworm Spodoptera litoralls is effectively controlled in the early stages of plant developmentthrough hand collectionof egg masses on the leaves by schoolchildren. Collectionof bollworma;d leafwormeggs and/or larvae and removalof diseaseinfected plants is also used as a control measurein other developingcountries, e.g. China. Handcollection of pests is feasibleonly in countries with a plentifulsupply of cheaplabor.

Tr4p Copping Ihe conceptof trap croppingis to grow an alternativehost to the major cottonpests to siphon them off the cotton crop, particularlyearly in the season. This process delays the use of chemical control,permitting a buildup of naturalenemy populations. The Philippine/Germancrop protection project, whichoperated in the Philippinesfor many years, made progressin using maize,tobacco, had odter crops as trap crops in associationwith cotton.

Widespreadproduction of maizein the majorcotton-growing areas of Egyptprovides a preferred host for the bollworm Hellothis armigera for most of the season and mimizes cotton infestation. In severalcountries, maize is grownin associationwith cottonas a trap crop to reduceor delaythe attack on cotton. The effectivenessof trap cropping,however, depends on havingthe trap crop at a stage of developmentthat makes it a preferredhost at a time whencotton is at its most attractiveto the pest.

Researwh

All the countriesreviewed in this paper have comprehensiveresearch programs covering crop improvement,crop protection,and productionpractices. Financialconstraints in many countrieshave resultedin the curtailmentof researchprograms. Problemareas are oftenlocation-specific, but may also be regionalor globalin scope.

rop urovwm

Steadyprogress has been made in improvingthe qualityand yield of cotton varieties. The fruitingefficiency or harvestindex, which is the ratio of seedcottonto totalabove-ground dry matter.has increasedsignifianly over the past 80 years. Modernvarieties produce no more total dry matmrthan do oldervarieties, but yieldsare higherbecause of the improvementin the harvest index. However,fiber length, perimeteror fineness,and matuit are conmponentsof both yield and quality, Mdselection for yield without sufficientattention to these other c istics may result in a decline in quality. Developmentsin textiletechnology over the past 30 yearshave placedgreater demands on quality,and new spinning tehology has changed the emphasis in fiber requirements. Thus, fiuber yield improvementsusing conventionalbreeding techniques may be limitedby the needto piDduce the fiber qualityand type neededby the textileindustry.

Hybridcotton has madeimportant contributions to cottonproduction in India, andhybrid varieties have also been developedin China In both countries,however, pollinationis manual and seed -29 - productionX very labor-intensive.Currenly, ChembredInc. is producingF 2 hybrid seed in the United Stae with some success. Male sterile lines of cottonhave been deveoped, but so far thee nimo effectivefertility restorer systemsuch as that in maize. However, maize is wind-pollinaed,and even with male sterile and restorer lines of cotton,the productionof adequatesupplies of hybrid sed would be difficultbecause of the need for insectpollination. Despite these constraints,hybrid varietiescould have a place in some developingcountries where cheap labor is available,provided yield gains are sufficientto justifythe cost of seed production.

Geneticengineering has madeconsiderable progress in the UnitedStates, but the objectiveshave been to introducecharacters to overcomespecific problems rather than to directly enhace yields. Varieties have been developedthat produce their own BacillusthurlnglnsLv endotoxins, which are effective against certain Lepidoptera. This could make major contributionsto integrated pest management. Work is also underwayto developvarieties that have toluance to certainherbicides to improveweed control by wideningthe range of productsthat can be used. It may be some time, bowever,before genetically engineered varieties are availableto developingcountries. Water,Nitrogen, and GrowthRegulators In dry areas where cottonis producedunder irrigation, growers can controlplant growthuntil the onset of floweringby manipulatingthe timingof irrigation. Once the crop starts to set, vegetative growth is restrictedby the plant itself. In2areas where cottonis producedunder drylandconditions, growershave no controlover water andhave to controlearly growthby manipulatingthe rate and timing of nitrogenapplicatiois. This is not easy, particularlyon ferile soils, if there is excessrain during the pre-floweringperiod.

-he progressmade over the past 15 years in the developmentof growth-regulatingand flower- teminating chemicalshas resultedin more manageable,earlier crops, faciliting more efficientinsect pest controland a cleanerharvest. The smallerplants are less attractiveto insectsthan large,vegetative plants,while the retentionof early bolls (that are heavier)results in an earlier crop, reducingthe period of exposureto insect atack&and water stress. The resultantreduction in risks is importanteven when there is no apparentimmediate benefit in tems of increasedyields. Growth-regulafingand flower- teminating chemicalshave becomean importantaspect of both irrigatedand drylandcotton production in the UnitedStates and other countries,but their use in mostdeveloping countries is limitedbecause of lack of researchand limitationson foreignexchange to purchasethese chemicals.

Cottonrow spacingin the UnitedStates has been limitedin the past to between38 and 42 inches, initialy by the widthof draft animalsused for cultivationand other field operationsand thenby tractors and implements.Recent research has shownthe advantagesof narrowerrow spacingof 30 incheswithout changingthe plant population. Thus the intra-rowspacing has been increased, providinga better distributionof plants in the field. Narrow row spacingin combinationwith the use of plant growth regulators, better use of fertilizers,improved early season insect and weed control, and the use of hemicalsto terminateflowering has resultedin earliercrops and often higheryields. However,narrow row spacingrequires tighter management.

In many countries,row spacinghas not been limitedby equipment,and narrowerrow spacing has been oommon.Nevertheless, the introductionof the factorsthat are contributingto successfulnarrow row cotton productionin the UnitedStates could be feasibleand could lead to earlier cropswith their -30 - concomitant benefits. Reserch is needed to demonstratethese advantges in terms of greaer profitability.

Water k rapidly becominga limitationto agriculturaldevelopment in general and to cotton poduction In particularin many regionsof the world. For example,prolonged drought conditions i_posed severerestrictions on cottonacreage in California. Populationgrowth will imposeincreasing pres on cottonfrom food crops. Underthese circumstances,water utilizedfor irrigatedagriculture mus be developedto ensureoptmum rer per unit of water. Researchresults are availablefrom several countriesto providea basis, wherenecessary, for adaptiveresearch (Hearn 1979;Constible and Hearn 1981; Guinnat al. 1981). Researchon waterconervadon in drylandagriculture is equallyimportant. Work in Africaover may years has shownthe benefis of early tillage in reducingwater lossesthrough evaporationduring the dry seon and of practicessuch as tiedridging and potholingto reducerunoff. Thesepractices may show little benefit in a wet year but can make the differencebetween success and failure during a drought. They have been recommendedin several Africancountries, and tied ridging, sometimesin combion withirrigation, has alsobeen studied in WestTexas. Adaptiveresearch is necessaryin other regons. weed CoMr

Weed competitonduring the first six weels of cottondevelopment can reduce yieldsby up to 40 percent (Ridgway,et. al., 1984,p. 336). In many developingcountries, little use is made of herbicidesbecase of cost ad restictionson imports,and labor for cultivationis often limitedbecause of competitionwith food crops. The resultantyield reductionis oftenneglected because it is not visible ad is not recognizedin the sameway as losses throughinsect pests. However, these losses may be offse by gainsresulting from the use of weedsas a green feed for livestock,particularly in more arid areas.

JnsecaPest Mawgagem

Cottonhas a comparativelylong flowering and fruitingperiod and is attractiveto variousspecies of insect pest over most of the growingperiod. The range of speciesand intensityof attack vary cniderably indifferent areas, but at somestage in mostcotton-growing areas, insecticidesare necssary to ensure acceptableyields. The progressionfrom subsistenceproduction to cnsis resultingfom excessive rdiance on insecticides is oudined elsewhere in this paper. Integrated pest management includesdisiminate use of insecdcidesbased on efficientapplication of the most appropriatechemical whenthe populationof a pardcularpest or groupof pests reachL the economicthreshold or actionlevel above whicheconomic crop losseSwill wise. In counties where productionis in the hands of large numbersof mialholders,it is extremelydifficult to implementthe trainingnecessary for crop spraying based on insect pest surveillance.Furthermore, procurement practices often imposeinflexiblity on the choice of availableinsecticides. In these circustancs, sprayingis carriedout on a routine,calendar bis with dcemicals. Applicationtechnology is often inadequate,and there is little knowledgeof economicthresholds for variouspest species. Insect pests do not recognizepolitical boundaries, and successor failure in insectcontrol in one country caminfluence the crop productionof a neighbor. The threat to Paraguayancotton production imposedby the boUlweevil, Ambonow grawdis,in Brazilis discussedin the appendix. Muchof the research necessaryis adaptive,but to be effcdve, it has to be supportedby intensivetraining programs -31 - to transferthe technologyto farmers. Regionalinitiatives such as those in West Africaappear to be the most logicalapproach to developingwider implementationof IPM in cotton productionin developing countriesand, at the same time, to strengtheningnational research programs.

CoaonLint Quality Developmentsin the textileindustry have accentuatedthe importanceof fiber quality,particularly strength,maturity, and fiber lengthuniformity. The developmentof HVItesting has providedthe means for the rapid assessmentof theseand other attributesand is being increasinglyused in marketingand in spinningmill qualitycontrol. HVIwas pioneered in WestTexas, and since its introduction,fiber strength there has increasedby 3 gramsper tex. Similarimprovements can be expectedelsewhere. HVItesting has contributedto greaterdialogue between producers and spinners,leading to greaterunderstanding of the importanceof variousfiber attributes.

Progressis being madein refiningHVI systemsto includedifferentiation between fineness and maturityand to measureshort fiber. Short fibers influencespinning efficiency and yarn appearanc. They are not present in seedcottonbut resultfrom fiberbreakage during ginningand lint cleaning,which is influencedby ginningconditions and by the ratio betweenthe attachmentforce of the fiber to the seed and fiber strength. An instrment has been developedin Belgiumto measurethis ratiobut is not widely usedbecause it is time-consumingand labor-intensive.Further research and developmentare underway.

Hand-pickedcotton is usuallycleaner than machine-pickedcotton, leading to highergrades with minimumcleaning during ginming. Less cleaningalso means less fiber damage. This gives most developingcountries an advantageover countries where mechanical picking is practiced. Thefiul benefits of this advanage,however, can only be realizedin the marketplaceif the intrinsicquality of the varieties is satisfactoryand is preserveddtrough appropriate production practices, including picking, packaging, stre, and ginnng, and if everymeasure possible is takento preventcontamination by polypropylene, plastic, and other foreign matter. Qualitywill increasein importanceas HVI testing becomesmore widelyused and as fiurtheradvances occur in textiletedhology.

ProgresscanMot be achievedin cottonbreeding without access to adequatefiber- and spinning- testing facilities. The achievementsin West Africa have demonstratedwhat can be accomplishedin producingquality cotton through regional research initiatives, backed by centralfiber laboratodes.

T7wa#r of TechnoloV

In many developingcountries, there are majorweaknesses in the transfer of technologyfrom researchstations to farmers. Theproblem arises through weakesses in communicationsand the lack of dissemiation of effectiveinformation system to cater to the large mnmberof smallholderfarmers involved. Successfilcotton production requires a reasonablelevel of managementskill, particularlyin insectpest management.It is difficultfor thk level of skillto be achievedwithout efective extension.

In many countries,insecticides are appliedon a routine, calendarbasis, resultingin inefficient pesticideuse with poor timingof applications,leading to ineffectivecontrol and an increasedlikelibood of developingpesticide resistance in major insect pest species. There are significantproblems in providingadequate traing, supportedby follow-upmonitoring, for the large numbersof farmers and extensionworkers involved. -32 - ReglonalResearch laltadaves

All the countriesdiscussed in the appendixhave reasonably large researchorganizations that are able to providethe necessaryclimate for innovativeresearch. In many developingcountries, however, research is restricted by limitedfaciities, travel, and staff. These limitations,imposed by budget constraints,inhibit the qualityof researches' output.

In WestAfrica, the Researh Institutefor Cottonand Exotic Textiles(IRCI) (nowCIRAD-CA) providesa networkthat ensuresan exchangeof informationamong researchstaffs of the Francophone countries. The influenceof the IRCT extendsto Centraland South America (workingwith research stationsin CostaRica, Nicaragua,and Paraguay)to CentralAfrica (assistingZambia) and to Southeast Asia (workingin Thailand,Vietnam, and the Philippines).

In 1986,the WorldBank conducted a studyof cottonresearch in Sub-SaharanAfrica (Gillham, 1986). The study recommendedregional research initiatives to strengthennational research programs. The InternationalCotton AdvisoryCommittee (ICAC) has been cooperatingwith IRCT and FAO in promotingregional cotton research meetings in Africa, Latin America, Southeast Asia, and the Mediterraneanand MiddleEast. Theseinstitutions are seekig to encouragean exchangeof inormation, leadingto regionalinitiatives in such areas as crop protectionand crop improvement(plant breeding). The successof this approachhas been demonstratedby the insdtutesunder the ConsultativeGroup for InternationalAgricultural Research (CGIAR) system. Regional initiatives can have the effect of strengtheningnational research programsby encouragingexchanges among researchersin different countriesand, where appropriate,providing solutions to regionalproblems.

The establishmentof a cottondevelopment institue as part of CGIARwas consideredin the early 1970s. This projectnever materialized,partily becausethere is no logicallocation for an interaional cottonresearch center. Nonetheless,regional initiadves are essentialif nationalresearch programs in developingcountries are to reachtheir full potential. These initiativescould be extendedto become internationalin scope.

Economics of Technology

Technologiesare often classifiedinto two generaltypes, accordingto their primaryimpacts on agriculturalproduction. The first type of technologyreduces the cost of productiondirectly through savingsin the costof agriculturalchemicals ard other inputs. Fertilizerand pesticidecosts are icreasing and accountedfor about 29 percentof totalvariable costs of cottonproduction (USDA 1988a). The need for addedfirtilizer can be reducedby appropriatecrop rotationsor throughthe future developmentof geneticallyengineered crop varietiesthat are able to fix their own nitrogenfrom the atmosphere. Fertilizerrequirements will also be reducedwhen water conservationtechnologies that reduce leaching ard runoffare applied. Pesticideuse can be reducedthrough host plant resistanceand the development of geneticallyengineeed varietiesthat producetheir own endotoxinsagainst bollworms and leafworms. This typeof teciology willhave an immediateimpact on reducingthe cost of production(USDA, ERS, 1988,p. 28).

The secondtype of tedcnologyincreases productivity through higher yields, but may involve additionalcosts. For example,plant growth regulators and herbicidescan be usedto increaseyields, but wouldbe too expensivefor wipread use in most developingcountries, unless the yield increase is sufficientto increaseprofits despite the extra cost. Yieldscan also be increasedby removingthe major - 33 - constraintsto increasedproductivity. Toese constraints may be alleviatedthrough the timdy availabiity of qualityirrigation water and other Inputsand throughimproved cultural practices.

Not onlythe availabilityof financialresources at the centrallevd, but also the need for eofective proceduresfor channellingfunds from the centerto the progrms and projectsadminstred at vaious regionalproduction areas are criticalto the successof the major gicultural subsectors,e.g., coma, In almostall countries. Tbus, newagricultural tedhnologies cannot be developedwidhout adequt fanding for research. In addition,other factorssuch as farm size, farm management,labor, and availabilityof credit are constraintsthat needassessment in order to achievesustainable growt in cottonproduction. The impactof these factorsvaries between developed and deveopingcountries. For example,in a sudy conductedby the USA Officeof TechnologyAssessment (OTA), the debt-to-assetratio of the U.S. farm sectorreveals that about 11 percentof all farms (243,000farms) have a 40 to 70 percentdebt-to-as ratio, whichmeans that these farms sufferserious cash shortfalls. Also, 7 percentof all faris (143,000 farms)have a ratio above70 percent,indicating that thesefarms are veryhighly leveraged (OTA 1986b).

In many developingcountries, arable land is limited,and cottonproduction must compete with food production. Therefore, crop intensificationplays a major role in cotton productionad ts contributionto cash revenuesversus meetingfood needs. The Bank's Eleventh AgricultureSector Symposium,however, underscored that implementingeffective intensification measures is knwledg and information-dependent,requiring effort and resource allocation to insdttionalizeagricultural research capacityto achieveadvances in crop yields(Garbus et al. 1991). The assessmentof relive cost of water,labor and other factorsof productionbetween cotton and other competingcrops shouldbe carried out fromthe angleof comparativeadvantage, national welfare, and policyobjectives in the multi-country sludy. 5

Consumptionand ProductionOutlook

Ihis chapter presents the forecastsof world productionand consumptionto the year 2005 containedin MarketOutlookfor Major Primary Commodities, World Bank Report 814/92(World Bank 1992d). These forecastsare madewithout considering resolution of agriculturalissues in the Uruguay Round of trade negotiations. GATT (GeneralAgreement on Trade and Tariffs) amendmentswould necessitatea revisionof this chapter. A brief discussionof empiricalwork completedby the Work Bank that is a partial basis for these forecastsis also presented. Historicalproduction and consumptionwas presentedin an earlier chapter. An Appendixcontains detailed country discussionsand data for key countries. The conclusionis that sinceworld area planted to cottonis not likelyto increase,technological advanceswill be necessaryin order to sustainthe upward yield trends required to meet the expected demandduring this time.

The WorldBank uses numerousestimates from empiricalstudies (in additionto other factors)in arrivingat production,consumption and price projections.The majorempirical work is containedin An Econometric Model of the World Cotton and Synthetic Fiber Markets (Coleman and Thigpen 1990). Resultsfrom the updatedmodel were used in the projections. The country classificationsare contained in the Appendix. The production/consumptionprojections are taken from the World Bankpublication, MarketOutlook for Mjor Primar Commodities,Report No. 814/92 (WorldBank 1992d),that used the cottonmarketing year 1991/92as a baseyear for productionprojections and calendaryear 1991as a base year for cotton consumptionprojections. Growthrates for productionand consumptiondepend on the baseyear selected,the underlyingeconomic assumptions and the methodology.Consequently, the model resuts are discussed.

Cottonconsumption in the modelis projectedby consideringtotal fiber use, income,population, prices and availabilityof manmadefiber and cotton,and policyconsiderations. This studyis a detailed worldeconometric model of all fibersthat canbe used to forecastworld cotton consumption using growth rates for incomeand populationand assumingthat purchasingpower parity is maintainedover the long run (i.e. exchangerates and CPI's are given a specificvalue). Price and incomeelasticity parameters fromthis modelcan also be used to forecastcotton consumption for severalkey countriesand/or regions. Theseare given in a later section.

World production is also taken from the Market Outlook forPrimay Commodities(World Bank 1992d). The empiricalmethods used to forecastworld production is also documentedin An Econmetric Analysisofthe WorkdCotton and Syntkc FiberMarkets (Coleman and Thigpen1990). A combinaion of parameterestimates for individualcountries together with the economicplans and policiesof individual countriesare used in arriving at the projections containedin the October 1992 Market Outlook. Formally,

PD = CrYD * CTHA CTYD = f(CTP, PF, W) CTHA = f(CTP(-l), PCC(-1)) where PD = cottonproduction, CTlYD = cotton yield per harvestedhectare, CIHA = numberof hectaresof cottonharvested, PCC = pricesof competingcrops, CTP = price of cotton,PF = fertilizer price, and W= weather. - 36 - Year-to-yearfluctuations in productionare greater than in consumptiondue primarily to variations in weather. The world price in the modelis determinedin a reduced-formequation as a functionof world endingstocks net of Chinesestocks. Price linkageequations are used to estimateregional or country pricesfrom worldprice. Cottonproduction has been revolutionizedover the past 40 years by the developmentof more productivevarieties, use of insecticidesand appropriate fertilizers, and increasedirrigation capacity. This developmenthas been a major factorcontributing to the increasein world production,which more than doubledbetween 1938-39 and 1988-89(Bell and Gillham1989). Over the past 15 years, however,there has been increasingconcern about the impactof these developmentson the environmentand about the incidenceof insecticideresistance in majorpests and the increasedemergence of serious problemswith formerlyminor pests. Becauseinsect pests are not confinedto politicalboundaries, the solutionto these problemsrequires a coordinated,regional approach to researchand development.

Cotton productionis dynamic,however, and historicaldata are of little value without an understandingof the situationin specificcountries in relationto cotton productionas a whole. An understandingof both cotton productionand the infrastructuresupporting it, includingresearch, is importantto an understandingof futuretrends in producingcountries (Bell and Gillham1989).

Cottonis grownin about76 countries,but in 1991/9285 percentof worldproduction came from the eightcountries selected for this paper,namely, United States, the formerSoviet Union (FSU), China, India, Pakistan,Egypt, Brazil,and Turkey. An appendixalso examinesthe currentstatus of and future prospectsfor cottonproduction and consumption,varietal development, and researchin these countries. Citingthe strengthsand weaknessesof these countries'programs could contributeto the improvement of cottonyield, to the productionof the type of cottonthat most closelymeets the needs of an evolving textiletechnology, and to the developmentof sustainableproduction systems that could benefitthese and other cotton-producingcountries.

Evaluationof EmpiricalModels Usedfor Forecasting

Empiricaleconometric models generally have two distinctpurposes (1) to estimatestructural parametersand 2) to forecast. It is well knownthat the best estimateof a set of structuralequations, when transformedto reducedform equationsand used for forecasting,will not necessarilyprovide the best forecastdue especiu]lyto unanticipatedpolicy changesin major producingcountries. In the real world, forecastingevaluation is generallyimpractical. The best modelevaluation generally consists of an economicevaluation of the elasticitiesobtained from the structuralcoefficients. These estinates by the WorldBank are consistentwith economictheory.

World Consumption Projections to 2005

Prior to 1991,world cottonconsumption increased in 21 of 25 years withthe 1990setback due more to inadequatesupplies than a worldwidetextile setback. During this period, world consumption grew abouttwo percentper year. However,all trends were brokenin 1984when (1) the record 1984 Chineseproduction and (2) the transitionto a new farm policy in the U.S in 1985 resultedin cotton pricessignificantly lower thanpolyester prices, stimulatinga 3.15 millionmt gain in worldconsumption from 1984/85to 19K6/87. Since the 1986/87crop year, cotton consumptionhas been relativelyflat -37- worldwidefor a variye of reon, the most IMpo bing (1) a gneal dedcinein Chum consuption that ommencodin 1986/87 d nded in 1991192due primarily to scarcesupplies. (2) th demiseof the textie Idustry inthe FSUand Eatem Europethat commencedi 1990and (3) word conooidccondidons.

Figure5.1.

WORLDCOTMuN CONSUMPTION MllilonTons 25

20-

10

5

50151 60151 701 Sr81 90191

s--we I4C, 199k.

The cotton consumxpionstatistics of the World Bankare apparentcalendar year consumption, defind as domestic mill consumpiDonof cotn plus the fiber equivalentof iuports of cctm maufiaures mnuimsexpors of cottonnufature. 1I 1991,the estmatedworld consumpdon of coton was 18,650thousand mt, of which6,880 Dtosad mt (36.9perent) was cnumed in highincomecomnies, comprin 6,695thousad mt (35.9 pat) in OECDcaties, ad 185 tbousandmt (1.0 percent)in non-OECDcunties. For LMXCs, cons aumptonwa esmatd to be 11,770 thousd mt (63.1 percent). of which 400 thousand it (2.1 percent) wa in Africa, 1,250 thousad mt (6.7 percent) in the Amicas, 6,730 thousand mt (36.1 pet) in Aa md Pacific, 2,645 thad mt (14.2 percent)in Eurpe, and 745 thousandDt (4.0 percent)in Middle Eat and NorthAfrica (TableA.1).

Mie aenn worldconsumption growth rate is expectedto declinefrom 2.1 percentbetween 1970 and 1990to 1.9 percentbetwen 1991and 2005. For thesetwo periods,however, increased growth raes are expectedin Europe, fom 0.4 perces to 1.4 percent; in Africa, from -0.5 percent to 0.4 percent A positivebut decliningrate of growth is expectedin all other regions (Table5.2). - 38 - Consumptionis estimatedat 22.13 million mt in the year 2000. The cotton consumption projectionsfrom the MarketO,tlookfor MaJorPrimary Commodldes (World Bank 1992d)are given in tabularform, year-by-year. Care shouldbe taken in evaluatingthe year-to-yearchanges since several factorscan distortthese statistics. However,the 1992193marketing year is now almosthistory and the forecastWorld Bank consumption of 18.63million mt for calendaryear 1992 and 19.63million mt for 1993are apparentlyonly very slightlyoverestimated.

World consumptionis expectedto increaseto 24,250 thousandmt by 2005. of which 8,720 thousand mt (36 percent) is expectedto be consumedin high-incomecountries, comprising8,420 thousand mt (34.7 percent) in OECD countries and 300 thousand mt (1.2 percent) in non-OECD countries. However,LMICs are expectedto consume15,530 thousand mt (64.0 percent)of which425 thousandmt (1.8 percent)are in Africa, 1,680thousand mt (6.9 percent)in the Americas,9,225 thousand mt (38.0 percent)in Asia and Pacific,3,200 thousandmt (13.2percent) in Europe, and 1,000thousand mt (4.1 percent) in the Middle East and North Africa. These data again indicatenot only a high proportionconsumed in high-incomecountries, but also a significantincrease in the consumptionin LMICs (Table5.1).

Typicallycotton consumption numbers are presentedby crop year (August-July)domestic mill consumptionto conformto the definitionof a northernhemisphere marketing season. Thesedata are subjectto conversionerrors as manycountries keep only data that correspondto eithera slightlydifferent crop year or maintamaccurate calendar year consumptiondata only. The major problemwith the crop year data, however,is that it is very difficultto estimateeither economicparmeters or forecastssince most economicdata are on a calendaryear basis and the tetile trade is very large. However,Table 5.3 indicatesthat the WorldBank forecasts of apparentconsumption are very accuratewhen compared with the latest ICAC (InernationalCotton Advisory Committee) wodd crop year mill consumptionfor the marketingyears 1990/1991through 1993/94.

Price and Income Elasticities Contained in the Empirical Study

The main objectiveof analyzingprojections of cottonconsumption and productionis to ascerain the possible impact of uncertain events ihatcould influencefuture trends. This may permit the considerationof proper measuresto upgradecotton yield and qualityto counteac adversefactors.

In applied economicanalysis, the elasticityconcept provides a convenientway to study the responsivenessof an endogenousvariable, e.g., quantitydemanded of a commodityor croparea planted, to a changein a relatedendogenous variable, e.g., its own price, a price changein a substituteor other commodityor crop, or a changein an exogenousvariable, e.g. consumer'sincome, holding all odter exogenousvariables constant Theseresults are obtainedfrom a singlestruct equation.The so-called impactmutiplier is similarexcept that it resultsfrom the solutionof a systemof stuul equationsand is definedas the dhangein the independent(endogenous) variabe (there are typicallyseveral) holding other independentvariables of changes in the exogenous(dependent) variables (whichmay occur simultaneously).

Colemanand Thigpen(1990) provided estimates of prce elasicities of cottonuse and income elasticitiesof demandfor all fibers. Ihese estimatesof price and incomeelasticites were computedat the meansof their prices, quantities,and incomesin each countryand are presentedin Tables5.5 and 5.6, respectively. Table5.1. CaftonConsumpdie Nojeelo.D.m(1993-2005) for Mkjor roduwngCountrie nd EconomcReom

1990 mi991p I 1mf 199f I 19f 9srf I It

_I~-~sm 6,910 6., 6.990 7,115 7.2 7.4 8.7 OCDo 6,723 6,69 6,770 6.915 7t07 7.22S 7I320 34 VM w 25 2,5 2,6"75 2,715 2,755 2,3W 2,990 3.110 IJV 1,129 1,100 1,130 1,165 I,lf I',24m 1m I,5'0 Nm4OCD 17 In 1,0 30 210 220 0 311

IsJ 11,763 11,770 IL,10 12,145 122 15S 14,0 2530 AM 39f 400 410 410 415 415 420 425 Ahnd 1.215 121I0 1.26 I'm I'm I'M 1,210 I'M 3a11 600 610 615 620 625 635 720 330 Ada& holfEo 6,515 6,730 6.310 7,000 7,105 7,2 Xso .22S Chin, PaWs.Rep. 3,765 3,100 3,910 4,000 4,095 4,115 4,70 5,250 hwiS.1,613 1,620 1zn 1,0 1.70 I,7S5 I'm 2.20 V.2g. 238 240 245 246 247 26 2S6 265 Eam 2,121 2,645 2,650 2,670 2,710 2,750 3,00 S,200 WaId NM A N.Aft& 747 745 750 765 7U5 IN 900 3010

W... 13,673 13,650 13.50 19,60 19,625 20.000 2,3130 24.50

pwhdmm w. W_ M% JMhudib Aoa r. ;gni Immve UbUl ,mm2 Mug-z - 40 - Tabl S.2. Cotton Consumption' Growth Rates of Major Pbodudng Countries and EconomicRegions

1Ann0 Rae (%) Count.yAEconomicRegion 1961-90 1 1970-90 1991-200Sf High Inome 1.8 2.4 1.7 OECD 1.7 2.3 1.7 UnitedSttes 0.9 1.7 1.3 Japa 3.6 3.0 2.2 Non-OECD 4.9 6.3 3.5

LMICs 2.3 2.2 2.0 Africa 0.2 -0.S 0.4 Americas 2.0 2.2 2.1 Bmzil 3.4 3.9 2.2 Asia & Pacific 3.1 3.0 2.3 China,People's Rep. 4.2 4.0 2.3 1na 1.8 2.2 2.2 Pakdstan 0.3 0.4 0.7 Eurpe 0.9 0.4 1.4 MiddleELst & N. Afiica 4.1 4.0 2.1

Wodd 2.0 2.1 1.9

-. See Country Classifications

No,r Least squaes trend for histoDcalpeiod (1964-16);end point for projectedpeod (1991-2005). a. Apparentconsmtion, see Glossy for defnition f. Forcas Sur": WrldBank 199.223 rabkA -2).

Table 5.3. World Bank and ICAC Cotton Consumption (1,000metric tons), 1990-1943.

-M 1990 1991 1992 1993 W addonk - Apparat 1,673 18,650 P 18.629 f 19,260 f ComYodCaendar ,Yea ICAC -Mill Coommtio Crop 13.736 I,334 18,U40p 19.1S0f

p: Prelmimry. f: Faoeem Soue: WorY Rank. 1992-225;IC.A C. 1993

In order to enable the reader to updatethese consumptionprojections, Table 4.4 containsthe ICAC countrycrop yeardomestic mill conmption, aggregatedaccording to the samecountry classification containedin theICAC Bulletin, Cotton World Statistics (ICAC 1993a). -41- Table 5.4. ICAC Crop Year Domesic MM Consumption (1990191-1993/94) for Major Producng Countries and Economic Regions

1990191 1991192 1992/93f 1993/94f

CoOlEa Omionic g * ' High-Inome OECD 4,219 4,321 4,722 4,337 UnitedStates 3,611 3,708 3,653 929 1,885 2,092 2,177 2,286 LMICs Africa 14,448 13,968 13,855 14,724 Americas 347 329 339 349 Brazil 1,344 1,385 1,424 1,469 Asia & Pacific 723 719 750 791 China.People's Rep. 8,918 8,852 9,425 9,770 India 4,225 4,023 4,575 4,774 Pakistan 1658 1,902 1,901 1,939 Europe 1,343 1,440 1,469 1,542 lurkey 3,227 2,765 2,502 2,486 MiddleEast & N. Africa 555 575 580 609 Egy 622 637 665 670 323 335 346 352 World Tota Above WolddTotal 18,667 18,289 18,577 19,061 ___18,736 =_ _ 18,334 18,629 19,151

* See Cuntry ClasificationTable Nore. ICAC World Totas incude 69, 45, 52, and 89 thouand mt consumpti in crop years 1990191 - 1993193fbr uaspecifiedcounties. f. Forcast Saww-ICAC1993.

The price elasticitiesfor cottonuse are higly inelastic,ranging from -0.02 in India to -0.33 in the Republicof Korea. Generaly speking, based on theoreticalexpectations and a prior knowledgeof the developmentpatern and cottonsector in these countries,the price elasticityestimates are expected to be higher for the istrialized and newly industiaized countries, but lower in the developing countries. However, the low elasticity estiates in Austalia and China of -0.06 and -0.08 respectively can be attributed to the fact that in the study by Coleman and Thigpen (1990), the response of cotton domesticconsumption to cottonprice changesis throughthe milling sectorand not throug the price of tradedgoods. Therefore,w.th respect to Ausalia, the low elasticityarises becausemorethan 80percent of maufactured cottongoods available for consumptionare imports,while for China, the wholesale cottonprices differ from worldproducer prices. In additon, the stgnation of the coton industryin the early 1970sis reflectedin the low elasticityvalue throughaveraging relationships over the estimation period 1964-86.Generally, however, the similaritiesin the elasticitieswith others obtained from previous studies (fables 5.5 and 5.6) lend furtier credenceto the estimates,given the differencesin model specificationand periodsof esfmatn. However,in a varietyof textle products,cotton is a preferrd fiber, suggestingthat man-madefiber is a limitedsubstitute. -42 - Tabk 5.S: Prle Dasiiesof Cotton Ue

Eldtcity of Cotto Use wih Respectto the Prke o£: CA.nVAry Cottn PolyesterStapl Argentina 0.07 0.07 Austria -0.06 0.06 BaZIl 0.18 0.17 CentralAfrica Regn -0.04 0.04 China -0.08 0.08 EC" -0.17 0.17 EEC -0.14 0.14 India -0.2 0.02 J1a -0.04 0.04 Korea,Rep. of -0.33 0.33 Mdso -0.09 0.09 Pakisn -0.04 0.04 Turkey -0.13 nDa Uni Stat -0.30 0.22

See County assiication Table. Not.: Boad on dt rgresion priod 1964-86for developingand 1964-87for husil coutis. a. Wher polyeser and cottonprice dastcities are equal, a raio of thee prices wu ued In th sw equ b. Mmprice of polyesterwa droppedfrom the share equaion for Tukey bece it had the wrong stgp.Hence, no dticity couldbe reported. $e. Cuim a Wbe.1990.52.

hi deasticityeates presentedin Table 5.5 can be used tD addressquestios rdated lo cotton policy. For example,if cottn pris rise, ceterisparibux, how much wil cotton demd drp? In China,if otonpries rise by 1.0percent, coon demanddrops by approximly 0.1 percent,buthe UnedStes,tEgpt, and India,coon demud drops by 0.3, 0.17, and0.02 perent, respectively(rable 5.1). Thi result indicatesdht the demandfor cottonis more price inelasticin India than in Chin the Unid Ste, d Egypt. Thesedata have policyimplications and policytrade-offs betw cottahaad other competingcrops whichcan be exmined in the multi-counrystudy.

The incomededcity of demandshows the responsivenessof qantity demandedof a commodity, e.g., couon,to changesin income,holding al other xogenousvaiables constant The stat_mciae Engelqaerted th as incomeincreases:

1. the propwton of the budgetspent on food declies;

2. the proporto spenton lodgingand clothingremains about the same;

3. tie proportionspent on all other goods ises (rsleifer 1976). -43 - Tabl 5.6: Cotton Use Prce Elastity Estxmates Obtained from Previous Studies Author Reegio DependentVariable Periodof Estimation Elwaficity Donaldat al. UnitedState Fiber Demad 1948-1960 -0.14

Dudley World Fiber Demand 1953-1970 -0.25

Thipn IndustrialCountrie CottonDemand 1955-1975 -0.20 DevelopingCountries CottonDemand 1955-1975 -0.09 Adams& Behren Develoing Countries FiberDemand 195S-1973 -0.23

Mues & Simmons UnitedStats Mill Consumption 1954-1986 -0.34 West. Europe Mill Consumption 1954-1986 -0.26 Redtof Wodd Mill Consumption 1954-1986 -0.10

Soiw: Coalmnand Tbijpn 3990:54. Table5.7 showsthe incomedasticities of demandfor all fibers in somedeveloped and developing countrieswith differentincome levels. Incomeelasticities are generallyexpected to be greaterfor the high-income,developed countries, such as the UnitedStates, Japan, and the EEC, than for lower-incomo countries. This is based on the premisethat consumerswith high incomeswill generallyhave smaller income elasticitiesfor clothingthan those with low incomes. The cotton consumptionresults are attributedto the avalabilityof low pricesfor importedcotton manufactured goods which letsthe income variable captureboth price and incomeeffects on consumption(Coleman and Thigpen 1990). The estimatesof incomeelasticity of fiber demandobtained from previousstudies are consistentwith these expectations(Table 5.8). Giventhe differencesin modelspecifications and the estimationperiods, recent empiricalresults of Colemanand Thigpen(1990) are not dissimilarfrom the resultsof previousstudies.

World Production Projections to 2005

Over the past three decades,world cottonplantings have shown little growth eventhough there havebeen significantshifts in wherecotton is grown. As examples,the cottonarea has expandedin West. Africa, Australia and Paraguay and declinedin Central America and Mexico. World production projectionsnecessitate combining both trends in where cottonwill be grown, with trends in yield.

Theacreageplanted to cottonhasnotdchanged significantlywhile consumptionhas been increasing at around2.0 percentannually as a result of increasesin yields. The increasesin yieldhave beengreater in the lower yieldingcountries. For example,Pakistan yields have increasedat 2.9 percentper year while the U.S. yieldshave onlygrown at 1.5 percentper year. As a fiuther example,the yed increa in PaIstndia combinedhas been amundthree percentsince 1982. Further shiftsin cottonplantings are likelyto result in decreasesin higheryielding countries and increasesin lower yieldingones. This will keep productionfrom growingas fast as potenial consumptionunless fiuther increasesin yield can be attainedin the lower yieldingcouties. However, as the base level increases,it becomesmore difficultto sustainan increasein yield. Bodtmodification of tedcnologyand adoptionof new technology will be essentialin maintainingyield trends (Table5.9). Table 5.7: IncomeFJInal of Demnd for All Fibers

Country' nome Elasicity Argentina 0.58 Australia 0.65 Brazil 0.32 CentralAfrica Region 0.54 China 0.91 EEC 1.08 Egypt 0.68 India 0.28 Korea,Rep. of 0.24 Japan 0.58 _v->sii 0.33 0.12 _ tes 1.04

See CountryClassification Table.

Note: Basedon the regressionpedro 1964486for developingcountries, 1964-87 for industrialcountries. Elasticitiesderived from the semilogfunction form PCTFU = a + b LN PCDFGDPare given by b/PCTFA. lbe historicalmean of PCTFAis usedtor each region. PCTFU = per capitatotal fiber use; PCDFGDP = per capitainflated gross domesticproduct; and a, b = interceptand slope coefficients, respectively,regression. Somvr Cobmmand ThWe 1990: 54. In 1991, the estimatedwodd productionof cotton was 20,793 thousandmt, of which 4,278 thousandmt (21.3 percent)was from high incomecouries and 16,355thosand mt (78.7percent) was from LMICs, where 910 thousandmt (4.3percent) was from Africa, 1,559thouad mt (7.5 percent) fromthe Americas,9,974 thousand mt (48.0percent) from Asia an the Pacific,3,272 thousad mt (15.7 percent)from Europe, and 621 thousandmt (3.0 percent)from the MiddleEast and NorthAfrica. By 2005, world productionis projectedto bie24,000 thousandmt, with 5,165 thousandmt (21.5 percent) from high incomecountries and 18,835thousand mt (78.5pert) from LMCs, where 1,140tousand mt (4.8 percent)is projectedfrom Africa, 1,925 thousandmt (8 percent)from the Americas, 12,405 thousandmt (51.7 percent)from Asia and the Pacific, 2,785thousand mt (11.6 percent)from Europe, and 580 thousandmt (2.4 percent)from the MiddleEast and North Africa. These figuresindicate a decline in the proportionfrom Europe and the MiddleEast and North Africa, and an increasein the proportionfrom Asia and Pacificdeveloping counties (rable S.10).

Ihe annualworld cmon productiongrowth rate is expectedto declinefrom 2.2 percentbetween 1970and 1990to 1.0 percentbetween 1991 and 2005. The annualproduction growth rate of the high- incomecountries is expectedto decline ffom 1.7 to 1.6 percentfor these two periods, respecdvely,in OECD countriesfrom 1.7 percentto 1.5 percent, and in the LMICs, fiom 2.3 percentto 0.9 percent (Table 5.9). The UnitedStates is expectedto maintainthe same productiongrowth rate of 1.0 percent for these two periods (Table5.9). - 45 - Table 5.8: EstImates of Income Elasticity of iSberDemand Obtained from Previous Studies

Author Region Dependent Period of Elasticity Variable Estimation Donaldet al. UnitedStates FiberDemand 1948-1960 0.80

Dudley World Fiber Denand 1953-1970 0.27

Magleby& Missaien World Fiber Demand 1964 0.62

Thigpen IndustrialCountries CottonDemand 1970-1972 0.07 Developing CoutonDemand 1970-1972 0.50 Countries CPEs CottonDemand 1970-1972 0.20

IndustrialCountries Fiber Demand 1970-1972 0.30 Developing Fiber Demand 1970-1972 1.40 Countries CPEs Fiber Demand 1970-1972 0.60

Adams& Behren IndustrialCountries Fiber Demand 1955-1973 0.60 Developing Fiber Demand 1955-1973 0.47 Countries ,

CPE = Centraly plannedeconomy. Sowe: ClonmAan7en190:56.

Area Elkcily EmpiricalEstmates In WorldBank Modd

The cotton area elasticityestimates show the responsivenessof planted cotton area to prce. Empiricalresults show that this responsivenessis inelasticto price changesin the short run, but is larger for the high-incomecountries (Table 5.11). This may reflect a greaterflexibility in determiningthe productionpaterns and rotation schedulesof alternativecrops in developedcountries comparedwith developingcountries. In general,however, elasticities of area plantedwith respect to price changesare larger in the long run than in the short run. In Argentina,for example,estimates for short-rm area plantedelasticity is about 0.87, but 1.40 in the long-run. Furthermore,in the southwestUnited States cottonregion, elasticityis 0.36 and 0.95 in the short and longruns, respectively.These differences can be attributedto the nature and structureof the agricutural sector where substantialtime lags exist betweena decisionto plant and the realizationof the final output. Thus,a relativelylong periodof about one year is requiredfor growersto respondto price changesand to reallocateresources (e.g., adjustthe area planted)for cottonproduction. In general,growers in developingcountries have less opporuite - 46 - Table 5.9. CottonProduction Growth Rates of Major ProducingCountries and EconomicRegions

Country/EconomicRegion *1 AnnualRato (%) 1961-90 1970-90 1991-2005 f High Income 0.5 1.7 1.6 OECD 0.5 1.7 1.5 UnitedStates 0.1 1.0 1.0 LMICs 2.4 2.3 0.9 Africa 2.1 1.6 1.0 Americas 0.2 0.3 0.3 Brazil 1.3 1.9 0.2 Asia & Pacific 4.0 4.5 1.7 China,People's Rep. 4.7 4.6 0.5 India 2.5 3.5 2.4 Paidstan 4.7 5.7 1.1 Europe 2.0 0.7 -1.1 Tuwkey 2.7 1.1 2.2 MiddleEast & N. Africa -0.6 -1.7 -0.S Egypt -1.0 -2.1 -0.7

Woldd 1.9 2.2 1.0

Note: Least squarestzt-d for 1961-90;end point for projectedperiod (1991-2005). * See CountryClassification Table fi Forecast Swee: WoddBank 1992:222 Crable A-1). for substituting food crops for cotton, except for local and domestic consumprion, due to the lack of efficientprocessing facilities and marketingservices that wouldenable these productsto competein the internationalmarkeL Furthermore,developing countries have a comparativeadvantage in producing cottonwhich enhancestheir terms of trade in the internationalmarket, e.g., Egyptand China

Elasticitiesof area plantedto cottonestimate how much it will increaseif cottonprices rise. Thus if prices rise by 1.0 percent,the area plantedto cottonwill increasein the westernUnited States, China, and westernIndia by 0.41, 0.11, and 0.09 percent,respectively (Fable 5.11). This can be attributedto the applicationof more intensive modern technologyin the United States compared with China and India, providing flexibility for fast adjustment of resource allocation for high-retun crops. Higher responsivenessin the United States comparedwith China and India may also highlight the role of advancedtechniques in price monitoringand informationservices in the United States which provide growers with reliable, prompt, and easily accessibleinformation to facilitate appropriate planting decisions. Well designedand well managedagricutural monitoringand informationservices wouldbe a powerfultool for improvingthe performanceof the agriculturalsector in developingcountries.

Price Projections

Cottonprice projectionsfor 1992-2005(Table 5.12) are based on an assumeddecline in thereal cost of producing cotton due to stable real costs of fertilizers and improved varieties requirng less pesticideand with improvedproductivity (World Bank data). -47 - During the lst four decades,sipificant chaug.shave occurred in cottonprices evey three or four years. Theo cyclicalmovements are reflectedIn differingrates of chuog In the nomiral and deflated price forecals, or indicatedby the CodookTMA Index. The CodookA Index is for comao clsed u an InternationalMiddling 1-3/32 inch, u dermined by CotloolkLtd, and Is calculatedby taig a simpleaverage of the day's cheapestfive quotadons(price offes), CIF NorthEurope, U.S. cent. per pound, for the followingfourteen growths now In the sdection: Memphis CentralAsian California/Arizona Pakistan1503 Mexican Chinese329 CentralAmerican African 'Franc Zone' Paraguayan Australian Turkdsb/Izmir(Antalya IndianH-4 Tanzanian"AR Type 3 Greek

TbisIndex is the widelyused indicatorof the competitivelevel of intemnationaloffering prices and is used by the USDAin governmt cottonprograms.

Table S. 10 showsthat the nominalcotton price is expectedto increase*om 13OCIkgto 229c/kg between1992 and 200S. Basedon the MUV deflator,however, the real price of cottonis anticipated to incems fom the large supplydepressed level of 122cIkgin 1992to 14Scikgin 2005. This can be attributedto the influenceof weather and agriculturalpolicies which are expectedto result in lower productionlevels than projectedconsumption levels. The region with the largest populationand tdo faste economicgrowth, i.e., the LMCs of Asia and the Pacifscis projectedto experiencethe greaest increasein cotton(nominal ar:d ral) prices in the near term, giventhe projectedpwduction levels.

Effkien Factors

Intensiveagricultural production is sential to increasingcotton production since avalability of arble land has becomea constraintto large-scaleexpansion schemes. Cottoncompetes with food crops for able land in most of the major cotton-producingcountries, and gowers often shift from coton to more profitablefood crops whenprocurement prices for cottonare below world marketprices.

Seedcottonconsists of lint and seed with impuritiessuch as leaves, stems, and burs. In the UnitedStates, growers market lint and are ableto take advantageof marketmovements to maimize their rens. Seedcottonis deliveredin bulk in cottontraiers or modules. A moderntrailer of seedoottDn will produce about 15 bales of lint, whereas a module will produce about 13 to 15 bales. Lint is dlassifiedand gaded after ginning, and bales from a single Waileror module should be relatively homogeneous. In most developingcountries, bowever,cotton is deliveredin small amountsand is marketedat a pre-etlished price set for seedcotton. Upon deliveryto the ginnery, the sdcottonis weighd and gadd to establishthe payment due to the grower. It shouldthen be grouped into homogeneousbatches of seedcottcnfor ginningto producehomogeneous bales (WorldBank data). This is not always done, however,with the result that the qualityof lint in the bale may be excessively variable. Tbis appliesparticularly to smalholderproduction, where seedcottonfrom a large mumberof growers is deliveredin smallamount. Table 5.10. Cotton PNoductionProJedions (1993-2005)for Major Producing Coutrias and Economk Reglos

1990p 1991p1 -- 992; - -1 i993f I 1994f 199Sf 20 t 2r

_ -G _~cm 3,935 4.278 4,115 3,730 3,U0 4,x5 4,705 S.165 OBCD 3,14 4,255 4.065 3,750 3,S56 3,990 4.660 5,115 UIiI Sht 3.37S 3.819 3,675 330 3.410 3.590 4,100 4,0

IIa 15.020 16.57M 15.915 14,720 15,120 IS,475 17600 I3s Afta 961 9U 945 370 Us5 n9 1000 ll.40 Amuka 1.703 1,U47 1,610 1,525 1,610 1665 I.US "1 1m1a 697 331 778 690 697 710 770 N90 Auha Fbd6. 3,222 9,556 9.620 3,320 9,110 9,39 13,35 132 CbNN,Phapb's .ep. 4,507 5.663 5,475 4,960 S,4 S,10 5,725 6C WaI 2,003 1,955 2,200 2,040 2,064 2,034 2,440 2,725 Fakiia 1,636 2,142 1,350 1,735 l,95 2,02O 2,350 2,500 aum"p 3,491 3.257 3,210 2,945 2,9S0 2345 2,925 2,735 luckAy 65S 565 S90 SSO S7S 580 690 765 Midl FAEa4 N. Afrks 647 624 600 560 56S 5SO 59S 50 EpiF 300 293 2t0 266 262 270 20 275 r rt World 111965 20,350 20,100 31.500 19,000 39,500 22.320 24.00

- __. _ - _ _ . m _ * a Caut Chuicadtn Table p. PnlIii f. Faca"td r. RevisdICAC pwducdo fior1990-1993 I 19,014; 20,793; 13,115; and 19.079dthoamnd WA pcdvly (ICAC1993I )

S&wmi: Woerd5R., 1992.222(rak A-IJ. -49- Table 5.11: ElasticieS of Area Planted with Respect to Price

Elasticityof Cotton Use with Respectto the Price of: Country* ShortRun Long Run Argentina 0.87 1.40 Centra! AfricaRegion 0.12 0.40 China 0.11 n/a India North 0.07 nla South 0.17 n/a West 0.09 n/a Mexico 0.56 n/a Pakistan Punjab 0.08 n/a Turkey 0.33 n/a UnitedStates Southeast 0.27 n/a Southwest 0.36 0.95 Delta (MississippiRiver) 0.27 0.60 West 0.41 0.72

Estimatesof Mues & Simmons(1988) UnitedStates 0.48 0.64 Australia 0.59 2.46 Restof World 0.06 0.25

See CountryClassification Table. n/a Not available. Sxmw Coama,ad TW1pen1990:92.

Sourcesof quantitadveand qualitativeimprovement in cotton productionare mainly in yield- enhancingtechnologies. This has becomeincreasingly important beauise futureproductivity gains from conventionalsources are likelyto comein smallerincrements than in the past. Thus, productivitygains can be achievedthrough efficient use of availableresources and throughthe developmentand adoption of appropriatetechnology, leading to sequentialexpansion in the attainableset of input combinations, whileminimizing the cost of producton by conservinginputs such as water and energy. In addition, yieldscan be enhancedby a high ratioof lint outputto seedcottoninput (GOT),exceeding the basic ratio of 1/3 lint and 2/3 cottonseed.

French (1977) provides an analysis of productive efficiency in agricultural markelt, demonstratingthat economicefficiency is a combinationof technicaland pricing efficiency. A firm is said to be technicallyefficient f its productionfuntion yieldsthe greatestoutput for an attainableset of inputs,given its locationand environmenLt.Firms that sre tehnically efficient,however, may still be -so- Table5.12: Nomina and DeflatedCotton Price Prqlectlos, 1992-2009

0-5 MUVDeflated G-7CPI Deflated Nominal(c/kg) (1990=100) (1990.100) 1992 130 122 116 1993 129 117 112 1994 153 136 129 1995 162 140 133 2000 206 150 140 2005 229 14S 130 a. Deflatedby G-5Manufactring Unit Value (MUV) Index. b. Deflatedby G-7Consumer Prie Index(CPM). Source: WorldBank Ocer 992: 226. Tae A.. inefficientin a pricingsense. Therefore,the centralfigure in anypolicy framework is pricg policy, becauseprices strongly affect a country'srate andpattern of development.Gettin prica rig is importantto achievingallocative or pricingeffiienc, thebasic nue beingto se theprice of eachgood or service,i.e., the marginalrevenue products, equal to its marginalcost (Barghoi at al. 1990).

Bresslerand King (1970)provide an analysisof estimat indexesto obtaina mure of technicaland pricing efficiency. The product of theindex of technicalefficiy ad theindex of picin (allocative)efficiency is ameasureofeconomicefficiency. In addition,French (1977) s dttet tt l marketi systemor an indstry subsystemmay be saidto be efficientif: 1. All firmsare economicalyefficient as notedabove; 2. The industryis organizedto utilizecapacity and to takmfid advantageof scae ad locationeconomies; 3. meindustry opeas underexchange mechanisms that genea price confsoin to a competitivestandard, such as thepefect market. Theabove analytical framework could be consideredfor analyzing cnicl andprice officienc in the cottonsubsector in the proposedmulti-country study.

Production Prospects and Rural Diversification

Cochrane(1974) defined the 'farm problemWa both an income and an uncertainty probm The incomeproblem derives from the generalylow levelof farm pricesand indasc demandfor farm products,and theunoertinty problem arises from the natureof agdculrl producion,in whih the productionof variousfarm commodities is infuencedby physicaland maticcon ton. hisIs reflectednot onlyin large angesin thevolume of output,but also in widelyfuctang cropprlcand farmincomes. herefore,the economicallyactive ruralpopulation ten to flowrfomthe fm seo to non-farmsectors for higherwage rates and more stable incomes. -5S1-

COTLOOKA INDEX US Cent. per Pound 200

150

100

o5 ll1 ZKiB1 7Wn7 lEI1 91fl om ICACJ_e 150

DEFLATE COTLOOKA UINDEX IrWYs Centsper Pud

nie. ,CC1*......

DEFLATEDCOLOKAIE

s1

swGMWS 7017 MI gm CacA- duilmlfdbyftis UA hnpQP dWWmK -52 - Farm incomes,in the short run, dependon the cost of production,which is mainlycorrelated withinput prices,yield levels, and farmgateprices of output. Nevertheless,high famgato outputprices are no guaranteeof highnet farm incomes,because high output prices are mainlythe result of highinput prices. In addition,general price inflationcauses the rise in costs of productionto be more rapid than faLrmgateoutput prices, so that net farm incomesfall. Bothincome and uncertaintyproblems have been reflectedin farm foreclosuresand rural depopulationof economicallyactive groups.

Rural diversificationis a majorconcern of policymakers and agriculturaldevelopment planners seekingto influencethe growth and sustainabilityof the agriculturalsector. Rural diversificationis a processof broadeningand strengtheningthe incomesource of ruralhouseholds. The processis integrated with agriculturaldevelopment strategies in terms of introducingnew crops, transferringtechnology, and adaptingtraditional farming systems, in additionto developingoff-farm rural jobs in small-scaleagro- industries(Barghouti et al. 1990).

Cotton productionprospects in the decade aheadare intertwinedwith yield improvementand intensificationrather than area expansion. This effort will dependon innovativegenetic improvement tirough conventionaland unconventionalmeans combinedwith changes in productiontechnologies. Technologytransfer, however,is neithera simplenor a directprocess because of agronomiclimitations such as soil, climate,and existingtraditional farming systems. In addition,socio-economic limitations such as norms, attitudesthat surroundthe applicationof transferredtechnology, and economicpolicy implicationsthat set parameterson investmentcombinations will determineimprovements in frmer incomestirough reducedcost per unit of output.

Quantitativelyand qualitatively,improvement in cotton production should be linked to the developmentof cotton-relatedprocessing and by-productindustries in nrualareas. This developmentwill provide employmentopportunities for economicallyactive rural populaions and enhancecash returns, providingmore stableincomes for rural households. 6

Conclusions

WorldBank projectionssuggest that there willbe an increasein productionand consumptin of cottontoward the year 2005, but these changeswill be at a lower rate than the increass betweenthe periods 1961-90and 1970-90(Tables 4.2 and 4.9). Prices are exp d to rise but to be lower ta currentprices whenadjusted for inflation. Conversely,the adjustedprice fbr polyesteris expectedto be higherthan the present level.

Pressuresto increasefood productionresulting from rapidpopulation growth wil preventmajor increasesin the area plantedto cotton. The same pressuresare likelyto result in an increasein reay, strip, and mixedcropping. The impactof thesepractices on yield and on insectpest populationdynics requiresdetailed study, since increasedproduction will necessarilyhave to result mainlyfrom yield enhancement.

Theprogress made in the Francophonecountries of West Africahas demonstratedthe advantages of vertical integrationof all elementsin the research-to-growerand the grower-to-marketchai. These linkagesneed to be reexaminedin view of advocatingmarket liberalizationpolicies and agrcut reform in most cotton-producingcountries. The West African experiencealso demonstraut te advantagesof regional research initiatives. A start has been made on regionalcoopeaton in Latin America,Africa, the MiddlEast and the Mediterranean,and Southand Soueasth Asia. Theseresearch itiaives shouldbe encouraged. Smaliholderswil comeunder increasingpressure to maitain productivityor even to continue to producecotton in the face of the rising costsof inputs,increasing compedtion for Ind and labor from foo crops, and a decliningreal price for cotton. These drumstances can only be ounered by increasedyields, which will have to comefrom improvedvarieties and productiontehology.

Presentmonopolistic govnmnt policiesin cottonproduction and markeg throughpaastatals andmarketing boards need to be examinedon a countryby countrybasis in orderto improveefficiencies and stengh likages. Pricing mechanismsof inputs and outputsin relation to world mkets are receivingincreased atention and producerprocurement prices have been increasedto 60-70 percentof world prices in some countries (China and Egypt) due to the introductionof agriculura reform Examinationof public and privatesector roles has been an importantitem on the marketrefrm agenda with a view to increase participationof the private sector and non-governmentalorganizations in agriculturaldevelopment in generaland the cottonindustry in particular.

This paper has soughtto identifyfurme issues and prospectiveimprovets in the compo of cotton productionsystems in major producingcountries with a view to adapt cotton productionin developingcountries, prmarily to changg cim n and to benefit smallholderproducers. Ultimately,the main benefidies willbe snallholdersin thosedeveloping countries that rely heavilyon cotton as a source of seasonalemployment and cash flow in rural areas and as a source of foreign exchange. Appendixes AppendixI

RegionalProduction and ConsumptionProjections

Africa

Africa's share of worldcotton production is small and it has declinedsince the mid-1980sdue to a reductionin cottonarea and yields. Prospectsfor recoveryin productionare dependenton sectoral adjustmentsto restoregrower confidence in the crop. Steadyprogress has been madein the Francophone countriesof West Africa, in Zimbabwe,and in SouthAfrica. Historically,the Sudanhas been an importantproducer of LS cottonbut has experiencedserious problemswith stickinesscaused by the exudatesof the whitefly, Bemeslatabacd. This problem has causedloss of marketconfidence, and future developmentdepends on findinga solutionto this problem. Cottonproduction in East Africa declined significantlyin the late 1970sand early 1980s. Cottonis economicallyimportant in the region, and efforts are being madeto restoreproduction to its formerlevel.

A declineis projectedin the annualproduction growth rate of Africa, from 1.6 percentbetween 1970and 1990 to 1.0 percentbetween 1991 and 2005 (Table5.9).

Productionin Africais expectedto increaseby some 150thousand mt between1991 and 2005, from 988 thousandmt to 1,140thousand mt (Table4.10).

The annualconsumption growth rate in Africais expectedto increasefrom -0.5 percentbetween 1970and 1990to 0.4 percentbetween 1991 and 2005 (Table5.2). Consumptionis expectedto increase from 400 thousandmt in 1991to 425 thousandmt in 200S (Table5.1).

Lain Americas

Cotton productionin Lain America has tended to staga due to heavy indebtednessand unfavorableagrcultural and trade policies. Improvementsare indicated,however, and it is projectedthat the amnnalproduction growth rate will be aboutthe sameof 0.3 percentbetween the two periods 1970- 1990and 1991-2005(Table 5.4). Productionin the regionis expectedto increasefrom 1,559thousand mt in 1991 to 1,925 osand mt in 2005 (TableS.10).

Brzil is expectedto remainthe leadingproducer and to accountfor about43 percent of Latin Americanproduction, expanding from 661 thousandmt in 1991to 850thousand mt in 2005 (TableA.3). Brazil's anual productiongrowth rate, however,is expectedto declinefrom 1.9 percentbetween 1970 and 1990to 0.2 percentbetween 1991 and 2005 (Table5.9). There are good prospectsfor expanded productionin Paraguayand reasonableprospects in Argentina. However,the boll weevil,Anthonomus grandis,spread to mostcotton-producing areas in Brazilduring the late 1970sand 1980sand has become a serious problem. It could threaten productionin neighboringcountries, particulady Paraguay, Argendna,and possiblyPeru.

Brazil, with its large textile industry, is expectedto remain the leading consumerin Latin America,expanding from 610 thousandmt in 1991 to 830thousand mt in 2005 (rable 4.1). Brazil's -58 - annualconsumption rwth rat, however,I oepectedto declDinfom 3.9 percentbdwoee 1970ad 1990 to 2.2 percentbetween 1991and 2005 (CIble 5.2). ConumptIonfor theregion is epectedto lncremefrom 1,2S0 thousan mt Il991 to 1,6l0 dod mt i 200S(Table S.1). Me comn_pM growthrate, however,Ii expectedto decine sighty from 2.2 peet between1970 ad 1990to 2.1 percentbetweea 1991and 2005 (Table5.2).

Asia & Pacific (Excludingthe FormerSovet Union)

Cottonproduction in Asia, paicularly In China, India, ad Pakistan,the thee lat Asi producers,is increasingparallel with theexpanion in txtile industies. Populadongrowth ad rising incomelevels have increased the domesticdemand for cotton,while th region's low wag strucure h fvored the developmentof thetextile and garmeot industries for themanuact of exportcommoditia. Theregion's share of world cottonproduction and consumptionis expectedto rise into the 1990s,but at a lowerrate than in the 1980s.

The regionalannual cotton production growth rate between1970 and 1990 was esimatedat 4.5 percent (Table5.9). Expansionwas most rapid in Paldstan(5.7 percent) and China(4.6 percent), followedby India (3.5 percent). Thegrowth rate is expectedto declineto 1.7 percentbetween 1991 ad 2005, with China (0.5 percent)and Pakistan(1.1 percent). Thegrowth rate in India is projectedto be downto 2.4 percent. China (5,675 thousandmt), India (1,902 thousandmt), and Pakistan(2.176 thousandmt) accountedfor 97.9 percent of 1991 Asian and Pacific productionad 46.9 percent of total world production.They are expectedto continuetheir dominationof Asianand Pacificproduction to 2005, whenthey are expectedto produce6,050, 2,725, and 2,50 thusamdmt, respectively,accountig for 90.1percent of the Asian and Pacifictotal or 47.0 percentof theworld ta (Fable5.10). Expansion of Chinesecotton production to 6,050 thousandmt by 2005 will dependon higheryields resulting from improvedvarieties and productiontechnology, reinforced by the market incentivesthat were first intrducedin the 1970sand thatcontibuted to expsion in the early 1980s.

The consumptiongrowth rate in the region between 1970 ad 1990was 3.0 percent but is expectedto decline to 2.3 perce between 1991 and 2005 (Table5.2). Asian and Pacific cotton consumptionin 1991was estimatedat 6,730 tousandmt, accountingfor 36.1 percentof the worldtotal or 57.2percent of consumptionin the LMIC countries. It is expectedto increaseto 9,225 thousandmt by 2005, accountingfor 38.0 percentof the worldtotal or 59.4 percentof the LMICs' total (TableS.1). liC Eurpe

LMC Europeis likelyto see productiondeclining where the annualproduction growth rate is expectedto declinefrom 0.7 percentbetween 1970and 1990 to -1.1 percent between1991 and 2005 (Table5.9). Althoughthe expectationis thatthe completionof the AttaturkDam on the EuphratesRiver in Turky will bring 1.7 millionha of landunder irrigato, leadingto anexpansion in cottonproduction, cottonwi be only one of the man agriwltual commoditiesgrown under the new irigation scheme. The crop diversificatonin the FormerSoviet Union (FSU) will havea greaternegative effect on couon productionof theregion than the net increasein outputfrom the AtaturkDam (WorldBak, 1992,p. 217). Productonfor the regionis qxptedto declinefom 3,272thousand mt in 1991to 2,78S tbusad mt in 2005 (Fable5.10). 59 - he regionsannual cosmption growth rat Is expectedto acre. from0.4 percenbetee 1970and 1990to 1.4 pereot botN 1991and 2005 CFabe5.2). An epa ion In coudom Ii epecte from2,6S oaad mi 191to 3,200thouid m i 2005 ( eS.1). ThLucnbe atr to the expected reae in p coapiaiam in the rgio whicl wHilresult In Icacts In per cpita use of fiber product. Ilduding ctm teals (WoddBak 1M, p. 213). MiddleEast and binh*flct MiddleEat ad NorthAfia'sdhr of worldcottn productionI smallaldhou EgyptIs a leadn producerof ELS and LS coon. A dowingof the rat of declineIs projected Indhe ama production growt rate of Middle Et and North Afri, from -1.7 percent botween 1970 and 1990 to - 0.5 percent between 1991 and 2005 (Cable 5.9). Producdon for h region is eVpectedto declin fto 621 thouad nt in 1991 to 580 thousand t In 2005 Crable 5.10). Ibb cn be attribut to crp diversifcaton ad producersmay adjust their cottongowing aea each yar accordingto tuhe pecptIon of the proftabilityof growingcotton or oter competi foodcrops. The region'sanual consumptongrowth rate is xpectedto declinefrom 4.0 percot betwen 1970and 1990to 2.1 perces between1991 and 2005 (Cable 5.2). A slowincrea in consumponIs expectedfrom 745 thosandmt in 1991to 1,000thousad mt in 200S(able S.1). ThisI mainy duo to the economicslowdown In mostof the region. AppendixI

Country CottonProduction and ConsumptionProjections

Cotton productionhas been revolutionizedover the past 40 years by the developmentof insecticides.This developmenthas beena majorfactor contributing to the increasein worldproduction, which more than doubledbetween 1938-39 and 1988-89(Bell and Gillham 1989). Over the past 15 years,however, there has been increasingconcern about the impactof theseproducts on the enviromnent, the incidenceof insecticideresistance in major pests and the increasedemergence of seriousproblems withformerly minor pests. Becauseinsect pests are not confinedto politicalboundaries, the solutionto these problemsrequires a coordinated,regional approach to researchand development.

Muchstaistcal informationon cottonproduction and consumptionis available,and these data have been employedin the projectionsused in the preparationof this paper. Cotton productionis dynamic,however, and historicaldata are of little value without an understandingof the situationin specificcountries in relationto cottonproduction as a whole. An understandingof both cottonproduction and the infrastructuresupporting it, includingresearch, is importantto an understandingof futuretrends in producingcountries (Bell and Gillham1989).

Cottonis grownin about76 countries,but in 1991/92,85 percentof worldproduction came from the eight countriesreviewed in this paper,namely, United States, the formerSoviet Union (FSU), China, India, Pakistan,Egypt, Brazil, and Turkey. This appendixexamines the current statu of and fiuture prospectsfor cottonproduction and consumption,varietal development, and researchin these countries. Citingthe strengthsand weaknessesof these countries'programs could contnbuteto the improvement of cottonyield, to the productionof the type of cottonthat most closely meetsthe needsof an evolving textiletedhnology, and to the developmentof sustinable productionsystems that couldbenefit these and other cotton-producingcountries.

Production and Consumption Projections: Countries

Produaion

China is currendythe world's largestcotton producer, with a 1991/92harvested area of 6,539 thousandha, about 18.7 percentof the worldtotal of 34,932thousand ha, and with 1991/92production of 5,675 thousandmt, about27.3 percentof the worldtotal of 20,793thousand mt (Tables3.1 and A.1). Productionmore than doubledbetween 1981/82 and 1984185(Table A.1), and Chinawent from being a substntial net importerof cottonto a majorexporter. Abouttwo-thirds of this increasein production is attributableto improvedyields. Productionrose from4,637 thousand mt in 1983/84to 6,253thousand mt in 1984/85. Over these two years, the plantedarea increasedfrom 6,077 to 6,923 thousandha, but the increasein yield from 763 to 903 kglha was the major contributingfactor (GilMham1990). The 1984/85crop wasbigger than the combinedproduction of the United Statesand the former USSR, the world's second-and third-largestcotton producers, respectively.

Since 1985, productionhas fluctuated,but consumptionhas increased, making China a net importer of cotton once again The drop in productionresulted from a decline in both yield and -62 - auted ara (able A.1). Consmpton has incrasod as a result of expanion in the textil industry though the upgradingof exitn ring upml machines nd duough the introductionof advancedopen- ad and air-jet spinig technology. Mhecapadty of the Chinesetxtile industrycontinues to expud thvagh joint vonu with the UnitedStas, lapan, Euvope,and the Middle East.

Ibe txtie industry.5 Chinaaccounts for 25 percentof the country'sgross exportreenue, and r t custosttics ho. textil exorts earnedUS$13. 1 billion in 1989, an increaseof 16.1 pwcsa over 1988. Consoquendy,the pgvenmt aims to increasecotton productionto satis the inreaed demad for raw matea forthe texile indusary(USDA-FAS 1990). Moreresources have been devotedto tie developmentof newtxtile technologies,and ecownmic reforms are havinga positiveeffect on textle productionand expots. ChinaIs the world's fourth largestexporter of textileproducts, and teile exports ar almost2S prcent of the vaws of China's tot trade (lSDA-FAS 1993).

The dedine in yield from 903 kg/ha in 1984185to 728 kg/ha in 1989/90(Table A.1) has been due, In part, to advers climaticconditions, but also to shortagesor delays in the supply of essential Inputsand to the intrduction of croppingpractices that causedelays in cottonplanting. Tbe area planted o coton has declinedbecuse of a lack of grower incenives, more favorableprices for alternative commoditiessuch a vegetbles, and problens with financingto pay for the crop. The advantagesof vegeable producn are recognizedparticularly near the cities (Gillhan 1990; Lin et al. 1991). In adition, the incompleteliberaiation of the and make}t,the constaints on labor mobility,and the state price increues aounced for all maJorgri cropsfor 1989190affected farmer interest,leading to farmer resistnce to cottonproduction and an increasein the acreageof severd competingcrops at the ewense Ofcotton. ncased producivity will be cridc to meet the fu cotton re ents of China's textile induty. It will dependon the regnation of incentivesfor farmersto attain higheryields thro the prodction ebom involvinghigh-input systems, efficientmmangement, the spread of ybid oton technology,ad the efectvw mplemaionof the market-orientedreforms.

V'rkis

Traditonally,China grew Gossqplmarborwm varieties that produced short-staple cotton. IThese varietieshae be largelyreplaced by mediu le G. hsdn and ELS G. barbadensevarieties. The mdimle vareties have beendevelped mainlyfrom crossesamong lines from California,from the Ddetpine, Stoneville,ad Cokerseed companies in the UnitedStates, and from the IRCT breeding progm in West Africa ELS vaieties havebeen developedfrom Pima lines from Arizonaand from Egyptianlines (Gillham1990).

In 1983, about36.2 percentof the cottonarea was plantedto ZhongmianI and about 4 percent to dh ELS vaiety Xiai, which is grownin Xnjiang Province. By 1990, a new variety, Zhongmian 12, was rapidly replacwigZhongmian I in the norhern cotton-growingprovinces.

Work contiues on usingAnmic Uplandlines to developmedium-aple varietiesand on using Egypdan nd Pima line for the ELS cottons. The main selectioncriteda are a short season, improved fiber quait, multipleadversity reitance, and droughtand salt tolerance(Gillham 1990). Workis also underwayto develophybrid varieties and glandless(pssypol-fiee) varieties. The programis supported by fiber- and yam-tesft facili (Belland Gillhm 1989). Table A.I. China: CottonHarvested Area, Yield,Poductlon, and ConsumptIon,1981/1121993194

I| 32 | 1912139371 19 | 11,S |1 d19S__7 -INII----- M 1- 119 1

HaBXWrAn 5,116 5.12 6,077 6,923 5,140 4,6 4."4 5s5 Si2 S.SU 6,3 6CM SAW cowOha) U1.wrd(bWh) 572 617 763 903 17 32 S 750 723 87 I 6W W57

PM&a_) ('00 2,94 3.59 4,637 6,253 4,147 3,540 4.6 4,10 3,73 4,5 5.6 4,523 4,6

Couzmp;aow('(00) 3S46 3,663 3,410 3,44 4,117 4,S67 4,36 4,376 4,150 4,S 4,0 4,5 4,744

P. P(ralimly f. Fo flPtlWuy). ndifiaea mMic ta m mof3.61 3.-d I bbyaI 1000 I 19922 hwL

Sgouw: IC4C IC W407:190:-4;0 Ott 1992: Vol46 A. I IIp. 12-19. -64 - Research

Cotton research is a high priority in China and Is generally applied, adaptive,and farmer- oriented,aiming to solvepractical problems facing the farmingcommunity. The ChineseNational Cotton ResearchInstitute in Anyang,Henan, fallsunder die ChineseAcademy of AgriculturalScience and is a major research institute. It incorporatesdivisions of plant breeding, physiology/agronomy,plant protection,and informationand libraries. In addition,there are provincialcotton research facilities in all cotton-producingprovinces, though the exchangesamong them could be strengthened(Bell and Gillham1989; Gillkam 1990).

The largest cotton-producingprovince is Shandong,with researchfacility in Jenan, which has been supportedby FAO. The emphasishas been on trainingand the developmentof researchfacilities, includingfiber-testing laboratories. Training has takenthe formof overseasstudy tours and lecturetour of Chinaby foreignspecialists in plant breeding,entomology, and physiology(Gillham 1990).

In China,considerable progress has been made in the developmentof IPM technology,though implementationis limited. Trap croppingforms part of the IPM programand is intendedto reduceinsect infestationof cottonduring the early stagesof development,permitting a buildupof naturalenemies and thus reducingreliance on chemicalcontrol. Therearing and releaseof large numbersof naturalenemies, such as the parasiticwasp Tlchogrammaspp., have been developedand are an importantpart of these programs. To be effectiveon a large scale,this programrequires the participationof localvillagers who canbe trind to rear the wasps as a cottageindustry. Problemshave aisen amongsmallholder growers in payingfor this serviceand for communalinsect scouting services.

China has developed a unique technology,involving transplantedcotton, to facilitate the productionof wheatand cotton in the same season. Cottonplants are establishedin nurseriesand are redy for transplanting,using minimumtdllage technology, as soon as the wheat is harvested. This techniqueis labor-intensive,but it has an applicationin other countrieswhere there is pressureto increase food productionand where adequatelabor is available. Machinesdeveloped for transplantingtobacco and horticultuxralcrops could possibly be adaptedto transplantingcotton. This would reduce labor requirementsand would ensure better depth control during transplanting. Limited research on mechanizedtransplanting in the United States is possible, althoughthe cost of labor would probably mitigateagainst this practiceas a viable cotton productionoption. Researchon the mechanizaon of cottontransplanting has not been conductedelsewhere, though some interesthas been shownby Egypt's NationalAgricultural Research Project (NARP).

Increasingconsumption, in conjunctionwith decliningdomestic production, is the main reason for increasedreliance on cottonimports. In additionto the main factorsdiscussed above that have caused the declinein domesticcotton output are unfavorableweather conditions; intercropping practices at may causeplanting delays; and inefficientdistnbution of farm inputs, e.g., electricity,fertilizer, and diesel fuel (Lin et al. 1991). Recently,the resistanceof major cottoninsect peststo insecticides,particulady to pyrediroids,has increaseddramatically, resulting in yield reductionand qualitydeterioration (Xa, 1993). - 65 - UnitedStats

Production

The UnitedStates is currentlythe second-largestcotton producer in the world, with a 1991/92 harvestedarea of 5,244thousand ha, about 15.0 percentof the wodd total of 34,932 thousandha, and a productionof 3,835thousand mt in 1991/92,about 18.4 percentof the world total of 20,793thousand mt (Tables3.1 and A.2). Most of the cottongrown in the UnitedStates is south of latitude36PN. The main productionregions are located in the oDuntry'ssoutheaster, mid-southern,southwestern, and westernregions, where soils and climaticconditions are mostfavorable and resourcereallocation occs, withcotton planted on better land in each region. Agriculturalpolicy has a great impacton acreageshift bothamong and withinthe regionsand, thus, on aggregatefluctuations (Table A.2). Weadtercondionm, productionpractices, and the availabilityof modem inputs and water exert a great influenceon yield levels. Table A.2 showsthat cottonyields have increasedonly marginallyduring the last decade.

Water shortageproblems in Californiaand Arizonahave causeda reductionin the cottonarea. At the sametime, eradicationof the boll weevilin the Southeasthas resultedin a resurgencein inteest in cottonin the traditionalcotton rainfed areas of Northand SouthCarolina and Georgia. There is likely to be an increasein productionwith a shift in qualitydistribution.

One of the major findingsof an Office of TechnologyAssessment study on the impactsof emergingtedhnologies on agriculturalproduction is that the annualgrowth rate of the U.S. cottonyield wasonly 0.1 percentfrom 1960to 1982(OTA 1986a). The studyprojected annual rates of growthfrom 1982to 2000under three differenttechnology packages and under three differentscenarios for alterative technologyenvironments (Tables A.3 and A.4) (OTA 1986b).

PackageA. This packageincludes improvements through genetic engineering, enhancement of photosyntheticefficiency, plant growth regulators,plant diseaseand nematodecontrol, management of insectsand mites,weed control,chemical fertilizers, water and soil-water-plantrelations, control of soil erosion,productivity, tillage, multiplecropping, labor-saving devices, fuels, and land mangemet

PackageB. This packageincludes improvementsthrough communicationsand information management,monitoring and control,and telecommunications.

PackageC. This packageincludes improvements through biological nitrogen fixation, orgamc farming,crop separation, cleaning, and processing.

The impactof a new technologyon agriculturedepends, in part, on the timing of its availability for oDmmercialintroduction. Miis availabilityis subjectto the economicand politicalfictors that affect the growthof researchand developmentactivities and shapethe technologyenvironments. OTA studied three differenttechnology enviromnent scenarios: a more-new-techbnologyenvironment, a most liWly environmentCm which the amountof new technologydeveloped does not change), and a less-new- technologyenvironment. They are based on several assumptionsrelated to the real growth rate in researchand extensionexpenditures and to other factorsthat haveshaped past developmentand adoption of technology.The impact of thesetechnology environment scenarios is systematicallypresented in terms of an annualgrowth rate of 4, 2, and 0 percentto the year 2000, respectively,for researchand extension expenditures(fables A.3 andA.4). In addition,Table A.3 outlinesthe anticipatedimpact on cottonyield [i- -

-[ tim

3il 3 - 67 - of (1) a continuationof all past developmentsin the most likelyscenario, (2) more favorablefacon in the more-new-echnologyscenario, and (3) less favorablefactors in the less-new-technologyscenario. Ibis provides a range of likely future percentagechanges in cotton yield levels and is importantIn highlightingfor decisionmakers the potentialfor improvedcotton yields and productionprospects in the 1990s.

Table A.3: Estimated Percentage Change In Cotton Yield

TechnologyEnvironment Scenario to Year 2000 Technology Package Most Likely | More New Technology Less New Techology ~~~~~~~~Technology ll __ ___A 9.0_ 12.0 5.4 B 2.8 3.1 2.3 0.0 0.0 0.0

Smo: OJAINS: 7.

Varieties

Commercialseed companieshave the main responsibilityfor developing new varieties, consequentlythere is a wide choiceof Uplandvarieties for all the differentcotton-producing regions. However, Pina (G. barbadense) is only grown in parts of Arizona, California, New Mexico, and Texa. ine USDAand stateplantbreeders do not releasecommercW varieties but developgenetic breeding lines that may be releasedfor developmentand commercialproduction by the privatesector or maybe included in other breedingprogms as breedinglines. Geneticmaterial developed by the USDA is generally freely avalable, preferablyon an exchangebasis with other countries, but varieties developedby commercialcompanies are protectedby Breeders' Rights legislationand are availablefor trW and productionoutside the United Statesonly under contract.

Developmentsin textiletedhnology over the last 30 years have resultedin a greateremphasis on fiber qualityand have shiftedthe emphasisfrom differentfiber parameters. The introductionof HIVI testidgof cottonhas resultedin greaterdialogue between growers and spinners,with a consequentsteady improvementin fiber qualityin recendyreleased varieties.

Geneticengineering research is conductedby both the public and privatesectors. Ihe main current researchis to developvarieties that (a) possess the BT gene i.e. producetheir own Bacills d*wngleusLsendotoxins to controlbollworm and leafwormlarvae, (b) havegreater tolerance to certain herbicides,or (c) can fix atmosphericnitrogen in a similarmanner to that of legumes. Whileprogress is being made, it couldbe some time beforethese breedingmaterials reach a commercialstage and are availableelsewhere. -68 - TableA.4: AnnualGrowth Rate Assunptiom of Scenarlosfor AlternativeTechnolopy Enviroments

EnvironmentScenario Factor (1) (2) (3) MoreNew Technology MostLikdy Las NowTebcog Population Uniteda 1.0 [ 0.7 1 0.5 Wodd 1.8 1.6 1.3

GNP _ _ _ UnitedSaes 4.0 3.4 3.0 World 5.0 3.5 2.0

TradePolicy LessProtectionism: Continuationof Present Mo Proti More Favorable Trends Less Favorble

E xport De a d______Grain 1.8 1.4 0.8 Oilseeds 2.3 1.8 1.2 Red Meat 2.0 1.0 0.0

EnergyPrice _ _ (ConstantS) 5.0 3.0 j 1.0 EpenditureResearchand Eitension (ConstantS) 4.0 2.0 0.0 InflationRate 8.0 f5.0 3.0

Research Cottonresearch in the UnitedStates is conductedmainly by the USDA'sAgricLulal Research Sevice andat the statelevel by deparms of agricultrethrough the land-grantcolleges. Muchprogress has beenmade on theuse of growthregulars andharvest aid chemicals.Some of thisresearch is socate withthe developmentof narrowrow tedcnology(see p. 27). Narrowrow production,combined with plant growth regulators, efficient early season insect pest management,ad chemicalsthat terinate flowerdeveopment, has resulted in an earliercrop with existing varieties. This processhas ledto a reductionin pesticideuse andimproved quality by ensuringa crop setunder more fivorableconditons and earlier harestg withreduced deterioration from weatheeing. 69 - Th Former Soviet Union (FSU) Producdon

Politicalchanges in the FSU are havingan importantimpact OD markedng, and this is likely to result in dhangesin production. The spuedof changes,however, makes it difficult to predict the outcome. As part of thLerestucring of the domestc economytoward a marketorientation, the need to addressagriculture has been urgentbecause the managementof the sectorhas resultedin waste, mis- allocationof resources, and environmentaldestuction throughthe overuseof inputs where prices and costs have had little economicmeaning (Brools and Knudsen1991). The need for changehas become increasinglypressing, and currentpolitical changes are likelyto exert a majorimpact on the structureof cottonproduction and marketing.

The FSU is currentlythe third-largestcotton producer in the world, with a 1991/92harvested area of 3,005 thousandha, about 8.6 percentof the wodd tota of 34,932 thousandha, and 1991/92 productionof 2,491 thousandmt, about 12.0 percentof the worldtotal of 20,793 thousandmt (Tables 3.1 and A.5). Tbis comprisedproduction from the cetal Asian Republicsof Uzbelistan (61%), Turkmenia(17%), Tadjikistan(10%), Kazakhstan(4%), Kirghizia(1%), and the Trans Caucasus Republicof Azebain C7%). Recenty, cotton productionbas been influencedby a shortageof irrigationwater, serious soil fertilitylosses, salinitybuildup, and erviromental degradationresulting from heavyapplications of pesticides(World Bank 1990c). A shortageof foreign exchangefollowing the break-upof the SovietUnion has resultedin a declinein the importationof inputssuch as pesticides. Thesefactors are relatedto the competingneeds to inrease productionof cotton, food, and feed crops. The result has been decling cotton acreageand productionin recent years, and a fiurher declineis projectedin 1993194(Table A.5). Coeqety, cottonproduction policies are being changedto address the problemsthat have arisenfrom the existingcotton production system. Positivecorrective measures are occuring, such as changesin the use of land and irrigation. Between1988 and 2000, total irrigated lad wil increaseby 3.4 percent,thought the Lotalplanted area wil declineby 6.4 percent (WorldBank 1990c).

The cottonarea declinewil be gradual up to the year 2000. Consequendy,the annual oteon productio growth rate is expectedto declinefrom 0.5 percentduring 1970-88to -0.6 percent during 19899-2005(World Bank 1990 c: p. 271). Thecontinuation of reformsis expectedto result in a more efficientutilization of avable resourcesin the cottonsector, leadingto increasedyields. It will be difficult,however, to sustain yield increase to fully offset the reductionin cotton area, so cotton productionis expectedto decline. The trend towardgreater substitution of domesticcotton consumption by syntheticfibers, mainlypolyester, is expectedto continuein the mid-1990s(World Bank 1990c).

Themain impactof restructuringof the FormerSoviet Union (FSU) into 15 independentcountries has been a disruptionof trade flow where the level of world cotton exportswas raised by about 1.5 milliontons. Economicproblems have resultedin a cutbackin textile manufacturingand six former republicswithin the FSU are regardedas world exportsrather than domestictransfers, leading to a shift to nontraditionalmarkets for cottonproduced in the formerSoviet republics. Table A.S. Fonner SovietUnion (FOU):Cotton Harvested Area, Yield, Production, and Conumuption,198112-1993194

1981/lm 19852 193 194 216/9599SM 1987/S 1989 IMM 19/I9 1991 1993 _9938E

* am dAx 2,165 3,1"8 3,192 3,347 3,316 3,475 3,527 3,432 3.338 2,171 30 2.W 2,2

L1= IWS fgib) 744 709 0 7t6 339 765 700 300 795 333 12 7n W7

icaa (00c m ) 2,453 2,260 2,172 2,597 2,71 2 2,660 2,469 2,7"6 2654 2,0 2,01 20 2.337 1.224 c1 i. 1 io (I00 to") 1,710 1,655 2,720 I,79 2,003 2,047 2I, 2,003 2,9" 1 900 12,6 3,29

r. ;amCg

Jan: W.4CI9P 07 J9J 4:7. IWLI2.I2e19;C4C9iNk. -71- Tereoae majorenvironmental concrns, particularlyin the Aral Sea area of Uzbedistan.In the short toem,however, the need for hard currencyis likldyto drive maintenanceof current producdon levels, possiblywith inadequateconcern for environmentalimpacts. Also in the short term, shrage of inputs such as diesd fud and fertilizers could have a negative impact on yidds. Despite thes problems,current production leves are likelyto be maintained,and increasedrotation with alfalfa could reult in higheryidds and a reductionin the area plantedto cotton.

Coton P Breeding

Cotton has been grown in the Uzbekistanregion for over a hundred years. Prior to the Revolution,all cottonvarieties bdonged to the speciesGossypfin herbacewnand producedlow yieds of short staplecotton. In the early 1920s,varieties were introducedfrom Egypt and the United States and the selectionof locallyadapted varieties commenced.

The first breedingstation was establishedin 1922by Zaitsevand Valivov. Initialy, dt work involvedsdection within existingvarieties. This was followedby a programof hybridizationand sdection which continuesto the present. The programis supplementedby mutationand biogenesisand by work on hybrid varieties. However, the main variety developmentshave come from traditional breedingmethods. This involvesinter- and intra-varietyhybridization, hybridization between lines with differet geographicorigins and inter-specifichybridization.

In additionto the Plant BreedingInstitute, variety development work is conductedby the Instit of Cotton Production,the Instituteof Geneticsand the Instituteof ExperimentalBiology. Tbe State Universityof Uzbdistan (Tashkent)has also been conductingwork on cottongenetics over manyyeas. TheDepartment of Genetics,formerly the Departmentof Phytopathologyworks in closecooperi with the Universityin the devdopmentof immunologyin plant species.

The mainemphasis in plant breedingand variety release is directedtowards improved yidd, early natuity,resistance to VertiWwn wilt and an improvedginDing outturn Someseventy dite fams are resosible for varietymaintenance and seedmdltiplication. The maintenanceprogram involves progeny row slection withineach varietyand in general,each Elite farm is responsile for only one variety.

Prior to the colapse of the Soviet Union, the Central Agrictural Instute of Cottn ws responsibleiDr deciding which varietiessbould be kept in cultivationand for the assessmentof yarn qualty. This functionhas now fallen on the Instituteof Cotton Industryin Tashkent. Over thiry varietis are registerd, the reason given for the large numberof varietiesbeing climaticvariation and diffmeres in the level of Verdium wflt in the soil. However, once a variety is rdeased, the originatingplant breeder plays no part in its furthermaintenance and distribution. Consequendy,new varietiesare releasedwithout specifically replacing older varieties. This problemis recognizedby the Ministryof Agriculturewho are encouragingthe developmentof singlevariety rayons and oblastswith sngle variety gineries, using the Egyptianpattern as a possiblemodel. Bukharais the first oblastto achiev singlevariety stats (Buklara-6).

TheCotton Breeding Institute has an extensivegermplasm collection of nearly10,000 acquisitions from over 90 countries. Recentlyattention is being paid to wild varietiesbecause of their contribution to wilt resistance. In addition, there is a coilectionof 700 isogenic cotton lines developed by - 72 - AcademicianMusaev at the State Universityof Uzbekistan. This i9 believedto be one of the richest collectionsof its kindin the world.

Vareties

In the FSU, cottonvarieties were originallyselected from introducedAmerican and Egyptian varieties. Since the late 1920s,new varietieshave been developed*hrough hybridization and selection by local plant breeders. Long stapleor fine filter Gossyplunbarbadense varieties are grownin areas withthe longestgrowing season in Tadzhikstanand Turhnenia and in the southernregion of Uzbekistan. Elevenfine filter varietieshave been developedin Uzbekistanover the past seventyyears. Currently, tLey are grownon aboutten percentof the area and includeS-6037, Termez-14, and Ashkhbad-25with Termez-16as the dominantvariety. They have an averagestaple length of 39 to 41 mm. Thirty five mediumstaple G. hirsutumvarieties have been releasedin Uzbekistan,ninety percentof which have CaliforniaAcala in their pedigree. The dominantvarieties g-own on about ninetypercent of the cotton growingarea includeK;rgiz-3, S-6524, 108-F, An-Bayaut-2, Bukhara-6 and S4727. Thesevarieties have an averagestaple length of 32 to 34 mm and accountfor almost75 percentof the mediumstaple area.

The varietiesdeveloped generally have short fruitingbranches, reducing reliance on secondand third positionbolls. In the extremecase, so calledzero varieties have been developedon whichall bolls are carried directlyon the main stem. These varietiesare ideallyadapted to narrow row spacingbut could present problemsin mechanicalharvesting. Americanbreeders have experiencedproblems in maintainingfibre qualitywhen attempting to developthis type of cottonplant.

Research

Researchin the SovietUnion was conductedby the institutesthat cameunder the administration of the NationalAcademy of Science. These institutescontinue with their researchprograms in the FSU republics under the administrationof Republic Academiesof Science. The quality of research is high, but currentlyit is hamperedby a shortageof funds. Any researchon importedagro-chemicals such as herbicidesand plant growthregulators is almostnon-existent. For some twentyyears, the emphasisin the crop protectionprogram has been on biologicalcontrol and in Uzbedistan,this has been developed to a high degree, with over 700 bio-laboratoriesraising natral enemies of bollworm, mainly Dichogrammaspp., for releasein cottonfields. Researchon ifrigationmethods e.g. drip and furrow as well as reductionof water-loggingand salinityproblems are major concerns.

India

Producton

Historically,cotton has been one of the main sourcesof India's economicgrowth and a prime foreig exchangeearner. India is currently the fourth-largestcotton producer in the world, widt productionof 2,023 thousandmt, about 9.7 percentof the 1991192world total of 20,793thousand mt (rables 3.1 and A.6). The 1991/92harvested area of 7,684 thousandha was the largest in the world, amountingto about22 percentof the worldtotal of 34,932thousand ha. Yieldsranged from 177kg/ha in 1981182to 263 kg/ha in 1991/92 (TableA.6). The low yields are mainly due to limitationsin irigation and uncertainmoisture conditions in 50 percent of the rainfed area. This meansthat 35 percentof the total cotton-growingarea is marginalfor moisture,while irrigation covers only 29 percent of the area (Bell and Gillham1989). -73 - Annualproduction growth rates wereabout 3.5 percentbetween 1970 and 1990(Table 4.9). TIbs rate can be attributedentirely to yield increases,since the total cotton area declinedduring the 1980s (TableA.6), withthe increasein irrigatedcotton-growing area offsetby a contrction of the rainfedarea. Geneticimprovement has resultedin the developmentof high-yieldinghybrid varieties. Currently,about 40 percentof the totalproduction comes from hybrid varieties,grown on 28 percentof the area. Thestrategy for increasingcotton production during the seventhfive-year plan (1985/861990/91) wasto acceleratethe spreadof improvedtechnology, stressing the use of high-yieldingvarieties, optimum cultivationpractices, and successfulimplementation of IPM. Cottonis grownthroughout the country, however,and agro-climaticconditions vary widely,with annual precipitation ranging from 300 to 2,000 nun. Furthermore,cotton is both intercroppedand grownin monoculturein rotationwith othe crop. About65 percentof farmerscultivate less than 2 ha of cotton,and only 1 percentcultivate more than 20 ha; tractors,therefore, are not widelyused.

Althoughthe productionconditions that constrainincreased productivity differ among regions, some commonproduction constraints can be identified. Generally, irrigationwater is insufficient, althoughwater tables are rising in someareas; there is sufficientcertified seed for only 15 percentof the totalarea; and pest controlis inadequate.There is low fertilizerusage, and labor-savingimplements for timely plantingand other field operationsare nonexistent(Bell and Gillham1989). Becauseof these constraints,India's cottonyields are amongthe world's lowest,and it is anticipatedthat India's 1993194 cottonproduction level of about 10 percent of world productionwill continuethrough the 1990sand anal productiongrowth rate between 1991and 2005 is anticipatedto be about 2.4 percnt, which is betterthan the projectedworld growthrate of 1.0 percent(Table 4.9). This rate will dependmainly on the potentialto increaseyields throughwider adoptionof hybrids and other geneticimprovements and throughmore efficientand timelycultural practices.

Cottonbreeders and agronomistshave investigatedseveral approaches to overcomesome of these productionconstraints. For example,research to alleviatewater shortagesin raifed areas involvesthe labor-intensivecrowbar irrigation method, in whichwater is pouredby handdown a hole punchedinto the soil beside the seed at sowing time. This practice facilitatesearly sowing, the most iWely recommendedagronomic practice for improvingyields. Early sowingincreased the yieldsof H4 and other improvedvarieties by 20 percent. Sowingis often delayed,however, by factors such as canal irrigationschedules; double-crMpping systems, such as plantingsorghum first in seniaridregions because of cottonprice uncertainty;and dependenceon hired draft animals. Other culturalpractices, such as spacingchanges for certainvarieties, have beenrecommended by agronomiststo permit better accessfor sprayingand pickdng(Hitchings 1984).

Varietes

In the 1980s,significant qualitative and quantitativeimprovements in cottonyields were achieved throughthe developmentof hybrid cottontechnology. Seeds of hybridvareties producedthrough hand pollinationnow occupy28 percentof the cottonarea and contribute40 percentof domesticproduction. Seventypercent of cotton productionis from rainfed areas, where hybrids have enhancedyields and thereby increasedtotal production(Srivastava 1991).

Ihe developmentof hybrid cottonvarieties includeswork on intra- and interspecieshybrids between G. hirswu and G. brbadene and betweenthe short-staplespecies G. arboreumand G. herbacea. Progressin researchon hybridsin othercounties, includingthe UnitedStates, has geneally Table A.6. India: Cotton Harvested Area, Yield, Production, and Consumption,1981/82-1993194

I|_1981X_2| 1 191219 4 |_194SS I|SM6 1936157 1937133 Ili I [mm1192] 199

tiadudAn 3.060 7,71 7,721 7.3n 7.533 6,948 7,061 7343 7.331 7.402 7A4 7.480 7,181

Ki YWO(kab) 177 157 173 247 261 227 220 245 315 269 253 301 234

P.stda ('M too) 1,428 1,471 1,333 1.2 1,964 1.579 1,555 2,302 2.3 2,6 20 2252 2,041

Ca_mpdaaCM0sm) 1,271 2366 1,433 _ 550 1.564 1.702 1,703 1,762 13.76 1.956 12902 1.901 I.93

P. -Hmm r, FoCag

S.uw: IC4C 1991h ;4Z199) O 400 1992.12-19; ICC 199a. -75 - had litdo commercialimpact because of the cost of seedproduction. India relie on labor-hoive band emaculatlonand pollinationof flowersto producethe hybrid seed.

T'he 1990Hindu Survey of Indian Agricultre providesinformation on recent devdopmes in plant breedingand seed multiplicationto produce qualitynew bybrid seed of the DCH-32 ad H-6 varieties. Thre nw log-stple hybrids, NHB-12,NB-224, and TCHB-213,with higher yieds ad betterquality characteristics, capable of spinning80s count yas, have beenreleaed to replaceDCH-32. The new Uplandhybrid Savitahas higheryields and betterfiber qualityand has been releasedto replace MCU-S. ndiabas also becomea leadingproducer of ELScotton, the qualityof whichcnbo maintained by ensuringthat famnersgrow new ELS cultivarswith appropriatecultivation, irgation, fertiizer, and plant protectionpractices (Srivutava 1991'.

Research

Ihe climateof India is so diversethat the countryrepresents a region in ielf. CottonIs grown in a wide ra ge of climaticzones and on several differentsoil types. Cotton researchis conductedby the state agriculturaluniversities and by the institutesof the IndianCouncil for AgriculturalResa (ICAR). Te CentralInstitute for Cotton Researchin Nagpur is the main productionresearch staion, while the Centra Tehological Institute in Bombayconducts work on quality. The All-ldia CoordinatedCotton ImprovementProgram has contributedto the developmentof researchfcilis, aided, in somecenters, by the WorldBank (Bell and Gillham1989).

Icrp ing is widelypracted in India, as well as in other counties. It is likelyto increase as a result of pressure to produce more food and could increasethe returns per unit of land, although cottonyidds are likely to be depressed. Researchhas shown, however, that black grm (Phmolw mungo)or green pm (P. aureas)will #iveyields of 500 to 800 kglha withoutdepressing cotton yields (Bell ad Gillha 1989). n ring could exert a considerableinfluence on insect population dynamics,either to the benefitor de t of the cottoncrop. Researchon iP,erring is importat, and resultscould have applicationesewhere.

Pakdstmn

Ihe economyin Pa is highly dependenton the productionand exportof raw cotton,coton yam, and text products. Paistan urrentlythe world's fifth4argestcotton producer, with a 1991/92 harvestedarea of 2,881 thousandha, about 8.2 percentof the worldttal of 34,932thusand ha, ad with 1991/92production of 2,176 thousandmt, about 10.5 percentof the world total of 20,793thousand mt Cribles3.1 and A.7). CottoniS grownunder diverseeodlogical conditions, and consequentlycult practicesdiffer significatly by area. The averagecotton farm size in Paidstanis about 4.7 ha, wi about onethird plantedto cotton. One-thirdof the cottoncrop is culited in a crop rotationof maize- ber -grm-faovw-coto In the remainde of the plantedarea, cottonis grown after wheaL

In the mid-1980s,cotton yields improved with the releaseof a new heat-tolerantvariety in Pumjab and with increasedfertilizer use. Yields aveaged 338 kglha in 1981/82, increasedto 560 kg/ha in 1989/90,ad are epected to resec 757 kglhain the 1993/94season (Table A.7). Tbesefigurs ted to - 76 - be high, relativeto other majorproducing countries. However,the national averageyields in 1993/94 is anticipatedto about equalthe 1991/92record level. Yieldis influencedby high temperature,lack of soil nutrients,inadequate use of chemicalsand the widespreadoccuwrence of leaf curl virus (LCV).

The cottonarea is irrigated,with the canalsystem providing over two-thirdsof the water at the farogate. The remainderof the water is suppliedby tubewells,dhallow wells, and tanks. Risingwater tables and waterloggingare decreasingyields In some area (Belland GilIham1989).

In view of the importanceof cotton to the economy, efforts have been made to increase productionthrough increased yields. Technologicaladvances introduced include the wideuse of quality seeds(those withgood viabilityand vigor),judicious use of fertilizersand pesticides,art provisionof adequatewater. In addition, credit is availableto small farmers to financeneeded inputs and labor. Provisionof extemr financingfrom regionaland internationalinstitutions will facilitateincreased seed produc0ionand improvedlint qualitythrough modernization of the ginneries(BDell and Gillbm 1989).

As a resultof the recent expansionin the textileindustry, an increasingshare of the cottoncrop is being consumeddomestically. The governmenthas placed high priorityon increasedproduction to meet the increaseddomestic demand and has providedincentives to growers to increaseyields through price supportprograms and liberalcredit facilities. The textile industryis important,accountg for 19 percent of manufacturingvalue added, 28 percentof industrialemployment, and over 20 percentoi export earnings(USDA 1990). Privatizationand the nearly completeelimination of foreign exchange controlsare the majorbreakdhrough of favorablegovernment policies for recent successesof the textile industry'sdevelopment (JSDA, FAS, Jan. 1993,p. 35).

Varietes

AlthoughDesi cotton (G. arboen and G. herbaceum)is grown only on a limited scale in Pakistan,it is includedin the breedingprograms of bot Punjaband Sind. Punjabis the most impt cotton-producingprovince, with about 80 percentof the tal cottonarea. High temperaures can limit cotton productivityin the province,so the developmentof heat-tlerant varietiesis importat and can have a majorimpact on cottonproductivity.

-he vaiety MNH-93, released in 1980, is heat-tolerantand has a high yield potential and improvedquality. This variety, and other varietiesreleased in succeedingyears, contnbutedto the increase in averageyield in Punjabfrom 327 kg/ha in 1983/84to 637 kgiha in 1987188. With the exceptionof the varietyB-557, released in 1976,all the varietiesgrown in Punjabin 1988were released during the 1980s,and all showedan increae in yield potential. Two improvedvarieties were released in Punjab during the 1980s(Bell and Gilham 1989). In conrast, the major varieties in Sind were released prior to 1980, and yields remainedvirtualy unchangedduring the 1980s (Bell and Gillham 1989). Cotton productionin 1991/92reached a record due to the adoption of recomme plant protectionmeasures and the introductionof improvedseed varieties. For example,the S-12seed variety has a grater mber of boLlsper plant and yieldshas a five to ten percenthigher lint yieldthan other varieties(JSDA, FAS, Jan. 93, p. 34).

Research

Th Pakistan Central Cotton Committee (PCCC) is a quasi-govermntal organzaion headquarteredin Karachi. I is responsiblefor research and developmentin growing, marketig, and manufac--ingcotton. Researchtopics includeagriculture, economics and markeing, and teUnology. Table A.7. Paistan: Cotton Harvested Area, Yield, Production, and Consumption, 1981/82-1993194

Hayuim PA 2,21S 2,263 2,221 2,242 2,24 2,55 2," 2,620 2,599 2.662 2,11 2.46 2,7

LIt hUl fg ) 338 264 223 450 514 527 572 544 So 615 755 622 757 FcoAudoaM 0m) 74 624 494 1,001 1,216 1,219 1,468 1,42S 1,455 1631 2,176 1'm 2,176 Cai m(000 laM) 50s 528 503 545 533 700 767 *74 1,100 1,343 1,440 1,4W9 I,S

P.- f. Famsa

f.Y: IC4C 199h 047, 19M.- 00. Ir- 12-19:ICAC I9. - 78 - Multidisciplinaryagricultural research is carried out by dhe PCCC and includestrafer of tehbnology. The man researchstations are at Multanin Punjaband at Sakrandin Sind. There ar also researchstations in Ghotlin Sind,Sahiwal in Punjab,and D.I. Khan in the NorthwestFrontier Province, with a networkof substations(Bell and GilIham1989). In addition,agricultural research is carried out by the provincialagricultural departments, agricultural universities, and atomic energy agricultural researchcenters. Activitiesare coordinatedby PCCCto minimizeduplication (Bell and Gillbam1989).

Marketingand economicresearch is carriedout by the Marketingand Economic Research Section of the PCCC, whiletechnology research is carriedout by the PakistanInstitute of CottonResearch and Technology. This instituteprovides fiber- and spinning-testingservices to the plant breedersand the textile industryand also conductsresearch on seed, fiber, yam, fabric, and processingof cotton(ICAC 1989b).

Brazil

Production

Brazilis currentlythe sixth-largestcotton producer in the world andthe largestproducer in Latin America. Its 1991192harvested area was 2,121 thousandha, about 6.0 percentof the world total of 34,932 thousandha, with 1991/92production of 661 thousandmt, about 3.4 percentof the world toal of 20,793thousand mt (Tables3.1 and A.8). Total cottonproduction, however, has tendedto stagnate due to poor technology,smal plot size, inadequateland preparationutilizing draft animals,and pest control problems. Theseproblems have led to low yields,ranging from 230 kg/ha in 1981182to 312 kg/ha in 1991/92after a record 370 kglha in 1990191;and tota productionof 640 thousandmt in 1981/82and 661 thousandmt in 1991/92,with the largestproduction of 965 thousandmt occurringin 1984/85(Table A.8). The stagnanttotal cottonproduction over the 1980scan be attributedto numerous economicproblems, such as heavyindebtedness and unfavorableagrictural andtrade policies(Bell and Gillham1989). Recentlythe economyhas rebounded,and there are signs of improvedpruspects. The cotton boll weevil, however, spread steadiy through Brazil during the 1980s and was virtualy uncontroiledin the 1991/92season. It is a seriousthreat to the future of cottonin Brazil and threatens to spead into neighboringcounties.

Cottonis producedin both the southeastand northeastregions. In the southeastregion, there is no icrigatedproduction. Somecrop rotationis practicedto save on fertilizersand to combatnematodes. Seedis treatedwith a fungicideand is machine-planted.Thinning is by hand, whileweed contol entails hand weedingand herbicideuse. The northeastregion is semiarid and producesperennial as well a annualcotton, following low-cst productiontechnology. Recendy, production of mediumsaple cotto has inczeasedsignificantly in this region, but generallythe cotton area is dependenton cotto prices relativeto those of competingcrops and on the availabilityof credit (Be and GOllham1989).

Varedes

As a strong producerand export of teities (the textle industryaccounts for about5 percent of lrazil's manufacturimgsector), the countrypays specialattention to plant breeding,with hyb ion nd selectionused to develophigh-yielding, high-quality varieties. The mostlywidely grown varieties in the southeastare IAC 19 and IAC 20, developedat the Insttto AgronomicaCampinas ([AC), Sao Paulo. Thesevarieties are also grownto someextent in the northeast. Long-staplecotton is produced Table AA. BrazikCotton Harvested Ara, Yield,Ptoductlon, and Caimumptiot,19S1IS-13I94

amdl Am 2,779 2_.030 3.107 3.707 3,325 2,161 2.577 2.230 1,964 1939 2,121 1,'2 I'

L.J & u(kgi) 230 214 240 260 239 W3 335 313 339 370 312 338 347

pmisiia(mOOm) 640 648 745 965 793 633 164 709 666 717 661 X65 611

C4mwf (0cm .) 573 567 556 599 692 759 oil i2 764 723 719 750 79

P. -

1m ICAC 199k 0.7, 190:0 4?47 1993.12-19: lICC 199k - 80 - by the Mocovarieties in the northeast. Theseare perennialtree cottonsindigenous to the area. Emphasis has been placedon fiber qudity, but much work has also been conductedon Fusarlumwilt-resistance.

Research Cottonresearch is undertakenby EMBRAPA,a federalresearch institute, through its research stationsat CampinaGrande in ParaibaState; by IAC; by the InstitutoAgronomica do Paranaat Londrina in Parana(IAPAR); and by EMPAMIG,the agriculturalresearch institute in MinasGerais. Thebreeding programsof EMBRAPAinstitutes and of the provincialresearch stations are linked dtrough national varietytrials conductedanmualy in all cotton-growingareas (Belland Gillham1989).

Theemphasis on qualityhas changedperiodically. During the early 1980s,Fusamwn wilt became increasinglyimportant in the southeasternregion. IAC developedthe varietiesIAC 19 and IAC 20, whichare Fusadwnwilt-resistant and tolerantto nematodes,VerticUltum spp., ColletotrichungossypU, and Xanthomonasmalvacearum. lTe oil crisis of the 1970sresulted in greateremphasis placed on yield to offset the rising costs of fertilizers,pesticides, and fuel (Belland Gillham1989). In the northeast,the introductionof irrigationhas emphasizeddeveloping long-aple varietiesto replacethe current low- yielding,late-maturing perennial varieties.

Me boll weevil dominatedcrop protecdon research during the 1980s. Currently,the boll weevil is out of control and is devastatingthe crop in most areas. Financialproblems have restrictedthe use of pesticides,and no effectivealternatives have been developed,although recent IAC varietiesexhibit rapidboll set, whichconfers a degreeof resistanceby enablingthe cropto escapesome of the infestation. The possibilityof a further spreadof the boll weevilto neighboringcountries (Paraguay, Argentina, and Peru) is a concernthroughout the region. ExaminingU.S. experiencewith ftis problem may be helpfiu. In the 1960s, the boll weevil caused cottonproduction to almostdisappear from North Carolina and to completelydisappear from Vigia A successfulregional eradication program initiated in these states and their neighborsto the south in the 1970sresulted in a reswrgencein cotton production. This successsuggests that a similar regionalapproach will be necessaryin Latin America.

Turkey

Producion

Turkeyis currendythe seventh-largestcotton producerin the world, with a 1991192harvested area of 599 thousandha, about 1.7 percent of world total of 34,932 thousandha, and with 1991192 productionof 561 thousad mt, about2.7 percentof the worldtotal of 20,793 thousandmt (Tables3.1 and A.9). Cottonis grownin three main regions: Cukrova in southeastAnatolia, the Aegean region in westernAnatolia, and the Antalyaregion in southernAnatolia. The area under cottonremained fidy sble throughoutthe 1980s,but productionincreased as a result of higheryields (Table A.9). Further expansionis likelyin southeastAnatolia as the Ataturk Damis completedin 1992and to encompass1.7 million ha of land under irrigation, however, cotton will be only one of the many agricultral odiies grown (WorddBank 1992).

Cottonholdings, avaging 40 ha, are large reive to the size of holdingsin other developing countries. Withthe exceptionof weedconol andharvesing, mostproduction practices are mechanized. - 81 - ClimaticfactoDr exert a majorinfluence on production,and weed controlpresents serious problems that lead to lossesas highas 23 percentof production.

The govemmentprovided subsidies for seeds, irrigation,ferftlizers, and low-interestcredit for equipmentand pesticides. However, with the adoptionof economicreform programs,subsidies have beenvirtually eliminated, except on irrigation. Valueadded exports are favoredover raw cottonoxports, and consequentlyexporters have to pay a levy to the Price StabilizationFund on cottonexports (Bell and Gillham1989).

Varieties

Cottonhas been grown in Turkey for centuries,but until the 1920s,the main varieties wero Asiatic,G. herbaceumcottons. They are still grownon a limitedscale, but the main varietiestoday are Upland,G. hirsut'. cottons,mainly from the DeltapinePedigreed Seed Companyin Mississippiand the CokerPedigreed Seed Company (formerly in SouthCarolina, but now part of StonevillePedigreed Seed Companyin Mississippi),with Acalafrom the USDA/state/universitybreeding program in California.

Initially,the emphasiswas on selectingthe most suitableiported varieties. By 1972,70 percent of the Cukurovaregion was plantedto Deltapine15121, a directselection from Deltapine15; 25 percent to CokerCarolina Queen; and the balanceto Coker 100/153,a selectionfrom Coker 100. In the Aegean region,Coker A/2, anotherselection from Coker 100, was planted, and in the Antalyaregion, the only vraietywas Deltapine15/21 (Bell and Gillham1989).

For sometime, plant breedershave been developinglocal varietiesusing hybridizationand selectionamong introduced breeding material. Fusariun wilt, VenicWliwndahiae, is prevalentin the Aegeanregion. Ihe wilt-tolerantvariety Nazilla 66-100 was selectedfrom Coker 100 A12. A program was initated in 1972to transferearly matuity from the Russianvariety 153-Finto wilt-tolerantNazilla 66-100to combinethese character (Bll and Gihlham1989).

In 1988,Nazilla 66-100 was the majorvarety in the Aegeanregion and was also an important variety in the Anlya region. Cukurova 1518 was the major variety in the Cukurovaand Antaya regions. Deltapine 15/21 was sdll grown on a limited scale in the Cukurova and Analya regions, CarolinaQueen in the Cukurovaregion, and Coker 100 A-2 in the AegeanregionL

Research

Cottonresearch in Turkey is the responsibilityof the MiNistryof Agricultureand is conducted in all the majorand someof the minor cottproducing areas. The main researchstations are located at Adanain Cukmovaand at NaziLlain the Aegeanregion. Cerified plantingseed is producedon large nationalfarms.

Technicalassistance is pmvidedto growersthrough demonstration plots designed to promot new tednology. TheAgricultura Combat and Quanne Serviceassists growers with crop protection, while the Soil and WaterAdmintation is responsiblefor dmini n of nationalirrigationprojects. Farm- leveleducation is handledby the GeneralDirectorae of Agriculture. Seedand machineryare provided in part by the AgriculturalMachinery and ImplementsCorporation and in part by privatecompanies (Bell and Gillham1989). Table A.9: Turkey: Cotton Harvested Area, Yield, Producdion,and Cosuniption, 1981182-1993194

19Il/21M 1952 MM= ="m I|m7 A "71g 19"99|smm0 19909 149119 M|1 99

awied Am 64 M 60 76 660 566 566 740 725 641 59 643 617

i)YI,U 747 322 663 76 735 133 916 a U51 1,031 93 939 1,0

W_) 41 459 522 5o0 51 517 I 537 650 617 655 561 04

Cin _dm 311 339 31 414 422 5211 551 552 600 557 m5 580 f. Cn.

S IGEC419Ni.E47; 19Wh9047:CIC4199k - 83 -

F4 YE Producdon As a primesource of forein exdcage, cottonis vital to the economyof Egypt, dheworld's ninth-largestcotton producer. It is the mostimporta of the country'sthree most lucrative agricultural exports,the othersbeing rice andoranges. Egypt had a 1991192harvested area of only358 thound ha, about1.0 percentof the woddtotal of 34,932thousand ha, and 1991/92production of only 291 thousandmt, about 1.4 percentof the worldtotal of 20,793thousand mt (Tables3.1 md A.10). However,Egypt is a majorproducer of high-qpalityELS andLS cotton. Thereh majorconcrn in Egyptover the declinein cottonproduction, which fell from 499 thousandmt in 1981/82to 291 thousandmt in 1991/92(Table A.10). As a result of declinin production,Egypt's cotton exports declined shaply in 1991/92,to theirlowest level during the decade, and a shortageof plantingseed was anticipated for the 1991/92season (ICAC Chart 1.Mb). Despite govermentcontrol over cotton production, including mandatory area allocation, the cotton area declined fromthe early 1970sto the late 1980sby overone-third due to the needfor increasedfood production andthe higher profitability of alternativecrops. Moreover,yields declined from 1,009 kg/ha in 1981/82 to 814kglha in 1951/92(Table A.10). Nosingle factor emerges as a majorcause of decliningyields. her is, however,a combintion of economicand technical fictors that contributesto low yields. The govemmenthas a monor"y on cottonproduction and maketing and has sought to maximizerevenue from cotton exports (UJSDA .:89). The resultant erosion of procurementprices paid by governmentagencies to cotton growerS,in comparisonwith world market prices, has beena primaryeconomic factor in decliningcotton yields ad production,but inputs intended r cotto are also being divet to other more profitablecrops. Th cost of productionper unit of lint (Kentar)increased from LE 11.3in the late 1960sto LE 58.1 in do mid-1980s.Labor costs increasedfrom 31.3percent to 59.3 perent of productioncosts duringthis period (WorldBank data). Tis situationis of particularconcer becausecotton has higherlabor iremt thanother crops. In manycases, the high labor costs have resulted in pickingbeing limitd to only one pick, the secondpick being left in the field. The significantincrease in productioncosts, combinedwith the steadyerosion of the govemnmer'procurement prices, has resultedin grower reluctanceto plan cottonbecause they can get higher financial returns from alteative cropssuch as long berseem,rice, maize,wheat, and vegeales. However,the 1993/94cotton area is expectedto expa as a reut of governmenteconomic policy reform which gives producers freedom to seiltheir crop u theychoose. The govermentwil be consideringa producer floor price for cotton. Becauseof this, a sizableincrease in producerret fromcotton wUl be theprary ftor thatdetermies areaplanted (USDAFAS 1993,p 40). Severaltechnical factors have also contrbutedto the declinein yields. Changesin rotations intendedto increasefood producdon hav resultedin delaysin ctton plating. The changein irigtion canalscheduln, fom a 7-7cycle (water avalble for 7 daysin every14) to a 5-5 cycle(water avalale 5 days in every10), to ut rice productionhas resultedin changesin irrigationscheduling md ha contibtd to problemswith waterlogging and salinity in someareas. An increasinglylimited genetic basefor breedingmaterial could be contibut to inbreedingdepression in existingvarieties and coud be a constraintto developingnew, improved replacement varieties. The maiance programis desiged to maintainvaiet purityand tD providea progressiveaccumulaion of furter improvementsin the qualityand yield factors. The seedig rate (70 kg/feddam),however, is excessive,resulting in seriou - 84 - strainson the seed multiplicationprogram. The high seedingrate results In excessiveplant populations prior to thinning, which could lead to serious competitionwith increaed seedlingdisea and pan problems,contributing to depressedyields (World Bank data). Varieties

Egyptiancotton has evolvedover some170 years and has manyunique features, rendering it oN of the world's premiercottons. The goverment exercisesrigid controlover the exchangeof genedc resources,and the indicationsof inbreedingdepression contribuig to cuarrentyield decreasescould be a consequenceof this policy (WorldBank data).

Initially,Egyptian cotton varieties were developedthrouph selectionfrom introducedmaterial. The first commercialvariety was Jumel, a Gossypiumbarbadense introduction that was grown as a perennialtree cotton,renewed every three years. Other G. barbadenselines were introducedfrom the Sea Islands and from Brazil. Natural crossing then began to play a key role. Ashmouniwa the dominantvariety for many years and was selectedfrom a field of coton in the village of Ashmounin MenoufiaGovernorate in 1860. Several other varietieswere selected in a similarmanner, but since 1920,the breedingprogram has changedto hybridizationand a pedigreeselection approach (Stead 1981).

Curcently,there are nine varietiesin commercialcultivation. They are replacedas new vaied. are developed. Giza 45 is the premierquality variety, but it is not a good yielder. It has been in cultivationsince the 19SOsand demonses the problemsfacing breeders trying to maintainquality while raisingyield levels. Ihe other ELS varietiesare Giza 70 (isis), releasedin the early 1970s,and Gin 76 and Giza77, releasedin the early 1980s. Long-stapleGiza 75 (Lotus)is the most widelygrown vaiety, coveringabout 46 percentof the total cottonarea. The other long-staplevarieties are Giza 80, Giza 81, Giza 83, and Dendera Deanderais the poorestquality variety, but it is hardyand is grownin the hahest cotton-producingarea in upper Egypt. It is being phasedout and will be replacedby Giza 80. Research

The AgriculturalResearch Center (ARC) in Gizahas 14 institutes,with seven substations in th Delta, middle,and upper Egypt. The CottonResearch Ilstitute is part of ARC and is headquted in Gin. It has a wel-organizedcotton research program, conducting research at the substationsat Sakha, Bahtim,and Ganmiza in the Delta and at Sids in upperEgypt.

The CottonResearch Instiute has a ProductionBranch, responsiblefor plant breeding,vaiety maintenance,agronomy and physiology,and a TechnologyBranch, responsiblefor ginnig, fiber and spinningtests, and cottonclassimg. Cotton research is also coneicted by the institutesdealing with soils and water, plant protection, plant pathology,agricultura economics,agricultural mechanization md extension,and rural development(World Bank data). Allthese institutesfall under ARC, but coopeatio and coordinationin the resarch programare limited.

Curently, Egyptis receivingsupport from the GermanCredit Aid Bank (KFW)in inrduing insectscouting as the basis for the tming of sprayapplications to replacecalendar spraying. Studiesare also underway,with support fromth GermanAgency for TechnicalCoopeation (GZ) andthe United StatesAgency for Intmrional Development(USAID), on dth introductionof acid delintingfor plantiqg seed. The U.K. is supportingraearch on the use of pheromonesto controlpink bollworm (Pealnopham gosozlea), on thedevelopment of a virusto controlleafworm (Spodoptera litoralhs), and on electrostatic rwaing. Table A.1. Egypt: Cotton Harvested Area, Yield, Production, and Consumption, 1981182-1993/94

191 198t22il33 19U3St4|1S 19195M65rss7s 19U9 99r0 19C 191J| 9Z"P 1Y3F 1tmmT'127ii 113 I I 19w1: ~~~1965/1s 1i,980 r 19n 19ww9M IM/91 119 19w2p11 Huh ea.dAmi 495 448 419 413 454 443 412 426 4n 417 38 356 359 cm0 ba) ukn hU (t&d)^ g.009 1,02 976 966 959 909 3S4 729 683 709 114 l,0a 921

?Yducdom(MCO I) 499 460 409 399 435 403 352 311 213 296 291 363 330

Cx uunMo (0C00wxM) 301 266 275 297 316 302 206 2u1 307 323 33S 346 352

r. PaMma

fuw7re:IC 1 .C4O,:04047; 199f5: C7i 17-19;ICAC 1993.. Appendixm

U.S. Cotton Programs and Farm Policy

The U.S. Governmenthas intervenedin U.S. agricultre since dheearly 1920s,primarily from the viewpointof farn incomestabilization, but more recently,including intemational trade. Numerous governmentmethods of accomplishingthese and other goalshave evolvedover the years, includingbut not limited to: governmentloan progrms, acreage allotments,marketing quotas, export subsidy payments, surplus disposal programs, crop insurmce, export credit programs, direct paymentsto producers, handlersand users of cotton, and supply controlby allowingonly producerswho follow goverment programson set-asideto be participants(e.g. the loanprogram and target price protection).

Early Government Programs

Decliningfarm incomeresulting from the depressionof the late 1920sresulted in the creationof the CommodityCredit Corporation(CCC). The 1933 AgriculturalAdjustment Act introducedthe conceptof party that persisted into the 1960s. This was based on a rigid historical formulathat atempted to keep the purchasingpower of agricltural commoditiesat the 1910-1914level. Ihe 1933 Act enabledfimers to remove land from productionin exchangefor payments. As an example,10 miion acres of cottonwere plowed-upduring the year. The 'Non-recourseLoan' was introducedin 1933 and marketing quotas were legIslated in 1934, remaining in effect until 1970. The Soil Conservationand DomesticAlbutent Act (1936) providedsoil conservingpayments to producerswho shiftedfrom cottonto "soil-building*crops.

The 1937 U.S. crop of 18,946,000bales of cotton, produoedfrom 33,623,000acres by 2.5 millioncotton finmers was a record. Despitean offlakeof almost 12 millionbales, the carryoverwas almost 12 million bales, and famers received an averageof 8.7 cents/pound. This resultedin the organiztional meeting of the National Cotton Council(NCC) in 1938 and the Iternatioial Cotton AdvisoryCommittee (ICAC) in 1939. The AgriculturalAdjusutent Act of 1938 providedmandatory quotaswhich were keyedto allotmentsand remainedin effectuntil 1942. Acreageadjustments were not in effectfrom 1943to 1949due to the need to expandproduction both during and after WorldWar U.

Duringthe 1940sand 1950s,World War II andthe KoreanWar createdincreased fiber demand. This, coupledwith high govemmentcotton support prices, resuted in an increasein cottonproduction in seeral foreign countries,a dramaticincrease in foreign textile production,and coincidedwith the commercialavailability of polyesterin 1950.

The Agicultural Act of 1948,later extendedthrough 1954, providedmandatory price spport for cottonat 90 percentof parity, if producersproduced approved marketing quotas. During 1951-1953 productioncontrols wereremoved due to the KoreanWar, wih a consequentbuildup in stodcs.

Ihe Agricutural Act of 19S4renewed allotments and marketingquotas whichremained in efect on cottonuntil 1978. As a result, cotton acreage fel from an averageof 25.7 millionacres from 1951 to 1953to 18.1 millionsin 1954155.The Agriculturl TradeDevelopment and AssistanceAct (1954) gave rise to the so-caled PublicLaw 480 (PL-480)which was used to stimulateexport salesby using foreigncunrency accumulated by the US Govemmentin developingcountries as payment. Other export enhancemnt programsfollowed. -88- Cotton stocks were 14.55 millionbales prior to the 1956 season. Ihe Soil Bank (1956) was implementedto permit further reductionsin acreage since allotmentlevels had been reduced to the minimumpermitted by legislation. Eventhough acreage fell to an averageof 13.3 millionacres during 1957and 1958, endingstocks were stil near 8 millionbales ealy in the 1958season. Stocksremained in the sevento nine million-balerange from 1958to 1962, but rose to 16.9 millionbales by the end of the 1965 season, due to higher productionresulting from increasedyields and decliningdemand for exportsfrom 1961to 1965.

Ihe Cottonand Wheat Act (1964)further reduced allotments. The two-tierpricing systemwas also abolishedas the USDASecretary was auhorizedto makepayments to domestichandlers and textile mills, in order to equate the price of cotton in the U.S. with the exportprice. Direct price support paymentsand a domesticallotment with a highersupport price than that of the regular allotmentwere also introduced. Loans were availableon the entireproduction within an allotnent. Tbis was the first year of "voluntarydiversion."

The Food and AgriculturalAct of 1965originally covered the periodfrom 1966to 1969but was subsequentlyextended to 1970. Thiswas a croplandadjustment program, as cottonacreage was diverted intoapproved conservation uses. The supportprice was, in efect, loweredas the marketprice of cotton was supported at 90 percent of the world price. The decrease in the loan rate, from 29 to 21 cents/pound,was offset by price supports. Salesand leasesof allotmentswithin states were permitted. By the end of the 1968 and 1969seasons, ending stcks had beenreduced to abc-t 6.5 million-balesand to 4.3 millionbales by the end of the 1970marketing year.

The AgriculturalAct of 1970resulted in the suspensionof marketingquotas for three years but this was exended and the suspensionis stil in effect. A set-asideprogram was introducedin whichthe diversionof cropsto conservationcould not exceed28 percentof the acreageallotment. The diversion paymentrate was set at the differencebetween the higher of 65 percentof parity (35 cents/pound)and the averagemarket price for the five monthsof ihemareting year, but not less than 15 cents/pound. The loanrate wasset at 90 percentof the averageworld price for the past two years. Set-asideprograms were in effect for both 197i and 1972. The 1970Act introducedgovermnent payment limits with a $55,000annual limit on governmentpayment to producersof uplandcotton, grains and wheat. Dunng 1971,the averagefarm price was 28.07 cents/pound,the loan rate was 19.50 cents, the price support paymentwas 15 cents and the toa supportprice was 35 cents/pound.

The Agriculturaland ConsumerProtection Act (1973)was passedagainst a back-dropof strong worldgrowth, world crop shortagesand the devaluationof the U.S. dollar. The loan rate was set at 90 percentof the averageworld price for the past three years. The targetprike conceptwas introduced, withthe targetprice leveldetermined by an indexof pricespaid and changesin productivity.Deficiency and disater paymentswere introducedand set-asidewas authorized,but not required. Paymentlimits were loweredto $20,000per personfor all crops.

In manyrespects, The Food and AgriculturalAct of 1977had majorimpacts. Sincefarm income had declinedin both 1976 and 1977,target prices were based on the cost of production. The limit on governmentdeficiency payments was raisedto $40,000, $45,000, and $50,000per person for 1978, 1979, and 1980respectively. The loan rate was set at a minimum48 cents/poud, so the inflationary impactwas built intothe program. Futhermore, the target prices werebased more on plantedacreage than on historicalallotments. As a result,major shifts in cottonacreage between regions commenced as cottonplantings began to move Southwestand West. -89- The AgriculturalAct of 1981 progressivelyraised the minimumtarget price for the next four years and raisedthe minimumloan rate from 48 to SS cents/pound. Acreagereduction programs were in effectfrom 1982to 1984but govemmentpayment limits remained at SS0,000per person until 19B5.

A worldwiderecession in 1982,and recordU.S. -ottonyields resulted in U.S. stocksreaching 7.3 millionbales at the beginningof the 1983 crop year, the year of PIK (ayment-in-kind)program. Producers were paid with CCC cotton stocks In exchangefor participatingin a 20 percent acreage reductionprogram. A drought, in combinationwith this acreagereduction program, reduced stocks to 2.7 millionbales by year's end.

The AgriculturalProgram Adjustment Act of 1984froze the targetprice at 81 cents, rather than the 86 centsper poundallowed by the AgriculturalAct of 1981. The minimumloan was raisedfrom 55 to 57.3 cents/pound.Under the 1984program, planting was permitted on 70 percentof the base acreage with a 20 percentAcreage Reduction Program (ARP) and a 10 percentPaid Land Diversion(PLD).

The 1985 Farm Bill

Hitry of the 1985 FarmEUW

Faced with declinin*gU.S. cotton exportsand domesticconsumption, growing textile imports, increasingstocks, low farm pricesand a depressedfarm economy,the U.S. Congresspassed the Food Security Act (FSA) of 1985 which PresidentReagan signed on December23, 1985. The new law establisbeda comprehensiveframework under which cotton and other agricultureand food programs wouldbe administeredduring crop years 1986through 1990.

The Food Sec ity Act differedfrom its predecessor,the Agricultureand Food Act of 1981,in several substantiveways. The 1981 Act coveredfour crop years fom 1982to 1985and set minimum target prices which increasedannually. The 1985Act coveredfive crop years from 1986to 1990 and continuedthe specificationof minimumtarget prices. ilowever, the target price minimumswere set at their maximumlevel in 1986 and were reducedeach year duringthe life of the Act Loan rates under the 1981Act werediscretionary for mostcrops and subjectto minimumlevels. Underthe 198SAct, loan rates were tied tDan averageof past marketprices but in the eventof the previousseason's price being low, or in the likelihoodof marketcompetitiveness being hampered by the formula-determinedrate, much largerdiscretionary reductions were permited. The reductionof the minimumson targetprices and loan rates wasintended to bringthem closer to recent marketprices, in the expectationthat the reductionswould reducethe effectsof target prices and loan rates on productionincentives and marketprices. Thus the 1985 Act is consideredto have introducedgreater market orientation into U.S. farm policy.

The 1985Act also madechanges in the area of acreagereduction programs. The law continued withthe use of authoritiesto reduce acreageof cropsduring periods of excessivesupply, but ratherthan beingdiscretionary as in the past, specificprograms were required when stocks were expectedto exceed certainlevels.

In additionto the general changesto loan rates, target prices, and supply-tiggeredacreage reductionprograms, the 1985Act provided the Secretaryof Agriculturewith wide discretionary authority for implemening anud commodityprogms. Many -, these authoritieswere created as optional -90- programsdirected at improvingmarket competitIveness and reducingsurplus stocs.

Cotton Under the 1985 Act

The major objectivesof the CottonProgram under the FSA were to: 1) protect U.S. cotton frm income during the transitionto a more market oriented economy, 2) restore U.S. cotton to a competitiveposition in the domesticand export markets,and 3) bring U.S. suppliesback into line with demand. The generalframework of the cottonprogram was defined in the FSA but detailedprovisions for implementationwhich were to be administrativelydetermined by the USDA,were r^quired. ITe cotton provisionstogether widtadministrative rules are the subjectof the next section.

(a) PriceSupports-Loan Rates, TargetPrices, Deficiency Payments. etc. Price supportsfor cottonwere loweredunder the program,and the loan rate no longeracted as an effectiveprice floor. Ibe loan rate for 1986was set at 55 centsper poundfor the base quality(SLM 1-1/16", micronaire3.5 to 4.9), comparedto 57.3 centsfor the 1985crop; from 1987to 1990,loan rate were the smallerof 85 percent of the averagespot marketprice for the previous5 years, disregarding the high and low years, or 90 percentof the adjustedNorthern European price quotation. If the Northern European calculadonwas less than the spot market average, the loan rate could be set at, any level betweenthe two. The loan rate could wt be reducedby more than five percent from that for the precedingcrop, and the minimumloan rate was 50 centsper pound.

The initial loan period was for 10 monthsbut could be extendedby another 8 monthsat the producer'srequest, unlessthe spot marketprice duringthe precedingmonth exceeded 130 percent of the preceding36-month average spot price.

If the Secretaryof Agriculturedetermined that the supplyof cottonwas excessive,an Acreage ReductionProgram (ARP), Paid Land Diversionor both couldbe authorized.To the etent practicable, the acreage limitationprogram had to be operatedso as to result in a carryoverof four millionbales. The mmamm reductionpermitted under an acreagelimitation program was 25 percentof the cotton acreage hase. For 1986, an ARP of 25 percent was announced,but no paid land diversion was implemented.In 1987, an ARP of 25 percentwas announcedwithout a paid land diversion. For the 1988 crop, an ARP of 12.5 percentwas announcedbut once again,witiout any paid land diversion. In 1989/90the ARP was 25 percentand in 1990/91,12.5 percent.

The Target Price (usedto calculatethe DeficiencyPayment rate, explainedlater) for 1986was St centsper pound, and for 1987,79.4 cents. The Act allowedfor a totalreduction of 10 percentfrom 1986to 1990.The target price for 1988was 77.0 centsper poundwhile target pricesfor 1989and 1990 were set at 74.5 and 72.9 cents respectively.

The DeficiencyPayment rate was set equalto the Target Price minuseither the nationalaverage marketprice during the calendaryear that includedtie fist five monthsof the marketingyear, or the loan rate for the crop year, whicheverwas higher. -91- Totaldeficicy paymentslenrly equdde productofdth paymnt rawtm tprogam yil timesthe acreageplnted for harvest. Underthe 1985Act, fivepercent of the tota payment wobe made in-kind.

Underthe 50/92 prvision, if an acea limtationprogram wa in efect ad a gower pld cottonon betwoe 50 ad 92 perce of the permittedaagp (Le.,bu acreageleu dte reqid reducdon nounced in do ya's ARP)for haret, deficiny pame a mad on 92 pec of th permittedacrage. e rmaini permitedacreage had to be oncoieaon usesor pltod to a approvednon-progran crops. As an wpl,wkha 125 prent acrge reductonfor 1983,a growe witha 100-acre ttonbas ould colleatdeficieny payments on 80.5 acrs 92 perces of 875 ac) If 43.75acres (50 percent of 87.5acr) wemplanted to uplad cotton.

For eachyea from1986 to 1990,te lifeof theAct, a PaymentLimitu watabHsd of $5000 per personon the um of thedeficecy anddiversion payments fom all progrmncrops,Iwding hki and cetficate payments. For the 1988-1990cop, taer wo an addikoal $250,000pe pmm limitationwhich applied to totl benefits,including: ddiciency payments, lon defilky paymen (or cumulativegains firom repaying a Ioanat les thn ordiinaamount), FPdley payums, landdveio payments,disaster payments md Inventoryreduction payments.

Commodityloans and purchaes and firt-handler or market cutficate wer eept frm th limitation.Since deficiency payments and div ionpayment wero bjectto a $50,000liit d a toa limitof $250,000applied to all beft, there was actuly a $200,000limit on toa maeIoan benefits. However,a pwducercould realize the ful $250,000in marketingloa benefit by foreg taget pricedefiiency paymen.

For purposes of paymet inadon, the legiatonprod specific uls for te Depatmu to legallydefin a 'Pemon whois eigo to receivepayments under the vaims agiulr progam as: an individuala corpoation;ajoint stockcompy; a ason; a limitedpuatnehip; a revocae trust, together witBthe grntor, an estate; a citable orgniaton; or a stat, po al subdivion, ad agency themeo.

Eahinidualor ent nd t have a sepae ad d Ct Itert iInela or cap, exerc P responbw y ma ataJointoperation met dt abovet requirements,th membe of th opertion also met the reqieme. A make_t copeative assadon of producersws not considereda person uder hfidsscheme.

In fte past,the rulu allowedentities whih werenot directlyinolved in the fmin operaio suchas an absentinvestor or a managementcompany which derived income from the frmig operto butperformed o acive rolein theopaon itel to qualifyfor paymen. However,comwmin tie 1989 cop year, changes in te ualeswer anounced whch had a dgnificat hmpacton eligibility.

The most importantchan in t rules rired mo activ enggemn in the frming operton by te eligible persoa(s), andlimited pame to an idvual ad two eites oa scribed abve, or Dthree entiies. Foreip ents andidWius werenow rquird to povide peson labor to the opratin beforethey becme eligibleto receivepaymen.

Prvisios for detmning t extentof ivolvementby an indidual, johit opeve, or -92- corporateetity were mademore rigorous. Requirementscommon to all thrts of aperson were: 1. each entit receivlngpayments independently made a significantcontrbution of capital, land or equipment,or a combinationof the three; 2. contrIbutonsbe commeurate withshare in the operation'sincome; and 3. the respectiv endties' contributionsmust be at risk. Significant cntributlons of land, capital, or equipmentrequired the contributionof 50 percent of the individual'sor entity's commensurateshare of the total requiredland, capitd, or equipment;or 30 percentof the commensuratshare of the toa valueof the farmingoperation if the individualor entity contributeda combinationof capital,land, and equipment.

If an individualprovided labor or activepersonal management to the operation,he or she was consideredto be activelyengaged in farming. However, if a joint operationprovided such labor or management,ik had to be providedby each individualmember, but the joint operationwas tie person receving the paymes. If a corporatonor limitedpartnership provided the laboror management,it bad to comecollectively from stockholderswho ownedat least 50 percentof the sharesin the organiaton, but aga, tie corporationwas deemedthe upeson receivingthe payments,and was subject to the paymentlimitation.

For the 1987to 1990crps, the Secretaryhad discretionaryautbority to makeadvance deficiency payments vilable which could be made in cash, in-klnd (cotton), or in negotable cerdficates, redeemablefor CCC-ownedcommodities. Advancepayments could not exceed 50 percent of the mated total payment,and up to 50 percent of the advancecould be in the form of certificate and inkind payments,except that the in-ldndportion couldnot exceedfive percentof the total paymeaL

The upland cotton Crop Acreage Base was calculatedas the average of acreage plantedand coidered plantedi the precedig five years, excludingany years in whichthe acre plantedand cosidered plantedwas not establishedfor the farm. If in any of the precedingfive years, no plantedor conidered plantedacreage was establied, the basea=reage determined widi the five-years-averagerole, exlding yeas wih no plantg history,could not exceedthe averageof acreageplanted and considered plantedin the most recent two crop years, includingtwo years withoutplanting histoy.

0b)A44(Wbuer to CrQopAcrge Baseand ProgramPayment YTelds The Secretaryanounced that producerswould not be allowedto shift base acreage betwee crops. However,adjustments to crop aaeage bases were consideredwhen producersneeded to adjust cropping patters to carry out conservationcompliance requirements on highlyerodible land.

Ihe Progam Payment Yield for the 1988 crop were calclated as the average of program paymentyields for 1981to 198Scrop years, excludingthe high and low years.

(c) A4Jd WorldPac The AdjustedWorld Prie (AWP)became a majorfactor in the cottonprogram and is still used as the basis for compaingthe valueof U.S. cottonto otherworld growths for the purposeof calcIating the varisloan ayment rates d valuingthecertificatesdescrbed inthe sectionwhich folows. In simpletam, the AWP is the avage Norther EuropeCIF (Cost, Insuranceand Freight)Index price of 31-35 cotton, adjustedby a somewhatcomplicated formula to the U.S. 41-34 cotton, with fiuther -93- adjustmentsfor locationand, if applicable,for low grade and short staple. The AWP i calculatedand rdeased every Thursdayaround 1600hours EastemStandard Time and is in effect from the following Friday throughmidnight of the next Thursday. In this way, the value of any U.S. originupland cotton is equatedto the worldmarket on a week-to-weekbasis.

The formla used to calculatethe AWPhas undergonemajor changessince its originalineption at the beginningof the 1986/87crop year.

(d) Marketig Loan Program A major feature of the cotton program in the Act of 1985 addressedthe loan rate and itB rdationshipto the worldprice (AWP)of cotton,since there wouldbe no incentiveto redeemcotton from the loan as long as the worldprice of cottonremained below the loan rate. The loan repaymentplan, or so-calledwmarketing loan," whichremained intact under the 1990Farm Bill, was the provisionof the 1985Act which movedto correctthis situation.

Underthe "MarketingLoan," if the worldprice (AWP)of cotton(as determinedby the Secretary of Agricultureand adjusted for U.S. qualityand location)is below the loan rate, one of the followingtwo loan repaymentplans, announcedat the outsetof the program,had to be implemented: uPlanA: Producerswere permittedto repay loans at a level determinedand amounced at the same time that the loan rate for the crop was announced.The repaymentlevel could not be less than 80 percent of the loantrate and once announced,could not be changed. bPlanB: Producerswere permittedto repay loansat the lesser ot i) the loan rate deterdned for the crop; i) the prevaiing world price of cotton(i.e. the AWP). For the cropsfrom 1987to 1990, if the AWP was below 80 percentof the loan rate, a loan repaymentlevel could be set no in excessof 80 percentof the loan rate. Paymentscould be madeto producerswho were eligible,but who agreedto forgo obtning a lan in returnfor the payments.The totd paymentwas the loan paymentrate (basedon programyields) tmes the amountof cotton otherwiseeligible for the loan. The loan paymentrate was the difference betweenthe loanrate andthe loan repaymentlevel. Up to half ofthe paymentcould be madein the form of marketingcerfificates.

In 1986,the first yearof the program,Plan A wasimplemented, and the loan repaymentrate was set at 44 cents/pound,the statutory80 percent of the announcedbasic loan rate. From 1987 to 1990, Plan B was utlized.

(e) Marketg CerIcates If eitherPlan A or Plan B failedto makeU.S. cottonfully competitivein worldmarkets and the world price was below the loan repaymentrate, negotiablemarketing cerfificateswere to be issued. Cetficates, valuedto make cottonavailable at competitiveprices, were to be paid to first handlersof the cotto. The valueof each certificatewas to be basedon the differencebetween the loan repayment lwel (underwhichever plan was in effect)and the worldprice of cotton(AWP).

The progam authorizedthe USDAto issuemarketing certificates in one of four forms: -94- First HandlerCerdifcates. These were cerdficates were Isued to approved"firt hndlers" of 1986crop oottonand redeemedon or after Aupst 1, 1986which wac not pledgedas collateral in the CCCloan, or for "firt handler' purchases of prior 1986-cropco>uo that was pledgeda loancollateral. The certificatewas issuedIn a monetay amountequal to the differencebetween the loanrepayment rate and the adjustedworld price (AWP)of uplandcotton in effectduring the weekin which the purchasewas made. The certificatehad a life of nine months. During the first five months, the certificatecould only be used to redeem CCC loan collateal cotton. Duringthe final four monts the certificatecould be used to redeemboth CCC loan collateral cottonand/or CCC-ownedcotton (i.e. cottonwhich had been forfeitedto the CCC). * InventoryProtection Certificates. These certificateswere issued to holdersof 'free stocks' (i.e., 1985or prior-cropU.S. raw uplandcotton not underprice supportloan or under any CCC loan inventory)as of 12:01a.m. August1, 1986. The certificatewas valuedat the loan rate for 1985186(57.30 cents) plus averagecanying chargesper poundas determinedby CCC, less the AdjustedWorld Price whichwas in effecton August1, 1986. Loan Defi'ciency/AdditIonalYield Certificates. For eligibleproducers who agreedto forego loan eligibility,the USDA issuedLoan DeficiencyPaymets (LDPs), valued at the difference betweenthe loan rate and the loan repaymentrate. For the 1986 crop year, half of this payment was madein cash, the other half in negotiablecertificates. Generic Certificate. Genericcertificates issued under 1986-cropfeed grains, wheat, and conservationreserve programs were also redeemablefor uplandcotton at a quantitydetermined basedupon the adju6tedworld price in effectat the timeof the redemption.The majordifference betweenthis cerdficateand the otherswas that a genericcould be used to redeemany commodity under the CCC loan, but a certificate issued under the cotton program was considered cotton-specificand couldbe used only to redeemcotton. df Loan Redempton Certificatescould be used to radeemcotton from the loan at the currentloan repaymentrate (the lower of the announcedloan rate in effector the AWP)free from all carryingcharges except charges for compressionand a portion of the storage, dependingupon the age of the loan at redemption. In most cases, this madethe possessionof a certificatewhen redeeming cotton preferableto redeemingcotton with cash, in whichcase all carying charges and interesthad to be paid at the tim', of redemption.

Initially,CCC absorbedthe carryig chargesfor cottonredeemed with a certificateas follows: 1985crop: all accruedinterest and storagenet of recompressioncharges up oo 18 months; * 1986crop: all accruedintert and storagethrough the initial 10 monthperiod, the redeemerto pay storageonly for months11 to 18; and; * 1987crop: redeemerpaid carryingcharges for monthsI to 10 if the cottonwas redeemed during the initial10 monthperiod, but if the cottonwas redeemedin months11 to 18, CCC wouldpay the chargesfor months1 to 10 and the redeemerwould pay storageonly for months11 to 18. The law providedthat commoditycertificates could be exchangedfor uplandcotton ownedby CCC. However,no authorty existedfor redeemingoutstanding loan collateraldirecdy with a certificate so beforeupland cotton under loancould be obtainedwith a commoditycertificate, it had to be purchased by CCC. Thiswas accomplishedthrough the followingthree-step paperwork process: 1. The outstandingloan collateral was redeemed from the loan for cashat its full loanvalue, plus interest,plus RecirculationOrigination chages (net of compression)paid by CCC, -95- if the cottonhad boee reconcentrated,plus any paymentof storagecharges by CCC. 2. CCCthen purchasedthe cottonfrom dte redeemerat the full loan liquidationvalue, i.e., the fiul cost paid by the redeemerin step 1. At the completionof this step, hecotton was ownedby CCC. 3. Commoditycertificates were exchangedfor the cottonat the AWP (adjustedfor quality, location,and, if applicable,for cottonused in coarsecounts) in effectfor that week, fre from all chargesexcept for compression.Compression charges previously paid by CCC wer addedto the exchangevalue of the cottonbeing exchangedfor cerdficates. In this process,the tasction wasentirely a paperworkprocess with no moneyactualy dhanging bn beween the redeemerand the CCC.

Sin the producerrealized no gain in redeemingthe loan as its full value in step 1, obtaning loan coUlaeralwith a certificatewas not countedagainst the producer's $250,000payment limitaio Furthermore,the net effect of the transactionwas that CCC paid those caryig chargesbecause the cottonwas echanged for cerfificatesfree of most charges.

Althoughthe certficates were originallyissued to participating"first handlers' and producers, thcy were, nevertheess, negotiableand transferableinstruments, and consequentlyan after-marketin thse certificates,especially in generics,was createdwithin the trade. TheUSDA would issue certificates to fam in lieu of cashpayments and the faer would,in tmn, sell themto merchants,eidter outight or as part of an equitytransaction. Afterwards,the merchantswould either use them to redeemcotton fom the CCC whener profitablesituations existed, or would trade them amongthemselves. The cetifies btradedat premium or discountto par, dependingupon the amount of storagethat could be savedand the price of cottonrelative to the loan rate (if the AWP was abovethe loan rate) or the loan repaymentrae (if the AWP wasbelow the loan rate).

The int of the programwas to guaranteea mnimumprice to the farmer equalto the announced la rate, whfle makn it possiblefor mercns to profitablymove the cotton regardlessof the price vel. However,because of the way the certificateprogram was designed,price levelsexisted where the we of a certficate to redeem cotton free of interest and most storage would not be any more advantaos tadn to redeemthe cotton for cash and pay all accruedcharges. In addition,dthre were brief pedods early in the programduring which the CCC had no inrventoryagainst which cottoncould be,rdeemed with cerficates. If ese certificateswere cotton-specific,the holderfound himself with a certficate whidhtraded at a discout to par. Proposas were madeto the USDAthat the cetificates eitherbe conveted to the genericvariety, or maderedeemable at par. The USDArejected both of these proposals and uldmately remediedthe sitation by exding the life of cotton-specificmarketng cerdficat.

1988 Oiwges to the Pogram

Ihe differencein cost to the merchantbetween cash and certificateredemptions continued to be a problem which bamperedthe movementof cotton from the loan. By late spring of 1988it was becomingclear that the programwas not havingthe desiredeffect and that changeswere desirable. After muh discussionand intensivelobbying efforts by industryrepresentatives, the USDAsettk -upon two significantchanges which took effiecton August 1, 1988. 1. The fDrmulaused to calculatethe AdjustedWodd Price was changedby using a shorter periodmoving average of domesticprice differences,in orderto makethe AWP respond to internationalprice developmentsmore quickly. 2. The burdenof carry fromcash redemptions was removed, effectively equat cashand genericCCC loan redemptions. 1989 Changesto the Program

Lae in 1988,the USDAproposed two signfficantchanges in the AWPformula. In the original calculations,the NorthernEurope CIF Indexprice was used as the base from whichtansportation and qualityadjustments were made. Thisprice wasthe cheapest5 of 10 quotationsfor rpr s ive gros of Middling1-3/32" cotton for nearby shipment. However, differentgrowths are acdvelytraded at differenttimes of the year, and there are periodswhen cotton of one or anothertype may be quotedbut not acaly traded. Durengthe trasmitionalperiod bxvween crop years, theseso-called nearbyshipmen quotationshave historically diverged by as mucixas 2 to 3 centsfrom the forwardshipment qutations, where businesswas acally being transactedfor new crop coton. Under these circumnces, the nominalquote of an iaive growthcould have an abnormallyhigh impacton the AWP calculatios.

Sincethe NorthernEuropean Price wasphased in betweencrop years, the tradonal- price was replacedby two nEWprices eady in 1989. This becameknown as the 'Dual IndexSystem,- the Index being composedof two indexes,a Curret ShipmentPrice (CSP) and a Forward Shpment Price (FSP). The CSP was for *oldcrop" shipmentsno later than AugustlSeptemberwhile the FSP was for -new croW shipmentno earlierthan October/Novemberof the current calendaryear. The FSP was usuallyintroduced early in a calendaryear, aroundFebruary and whennew crop couonbecame old crop late in the calendaryear, the FSP becamethe CSP. However,for severalmontis, from Februaryuntil the end of July, both indexeswere quotedconcurrendy. When the old CSP was withdrawn,the FSP becamethe CSP and was the only indexprice quoteduntil a new FSP was introduced.

The CSPwas phasedinto the FSP over a six week transitionperiod beginnng aroundApril 15, in order to avoid dramaticchanges in the AWP as the crop year changes. During the fir two weelk of the transitionperiod, the base NorthEurope CIF price for the AWP becamea weightedaverage of the CSP and FSP, with a two-to-onewe_iging in favor of the CSP, duringthe secondtwo weeks, the CSP and FSP received equalweight and during the final two weels, the weightedaverage became a one-t-two weigIting in favor of the FSP. From week seven until July 31, the FSP is became the N. Europeprice componentfor the AWP,and dhreafter the FSP becamethe CSPwhich was the N. Europe price until the next trnitonal periodthe foLlowingApril.

To ie.:

Week CIFN. EuropePrice Wlll Be: 1-2 (2 x CSP + FSP)J3 3-4 (CSP + FSP)/2 5-6 (CSP + 2x FSP)/3 7 to July 31 FSP July 31 & thereafter CSP (formerlythe FSP)

The seond proposalchanged the methodof calculatingthe uransportaiondifferential", one of -97- the componentswhich are sbtracted fromthe CIF N. Europeprice each week to rive at the announced AWP. Themodiication to thefomula wereintended to moreaccmudy rflet theactual shipping cost.

The tansportationdifferenial is duerminedas ollows: 1. Each Thursday,th averagewas derie of seven marketavne spot quotaton for Grade 31 Staple35 cotton, as reportd by the AgrcultmralMaeting Service. For this explanaion,this is calledRaw A. 2. The respectve Thursdaythe averagewas derined of quotesfor te CIF N. Europe pricesof Memphisand California/Arionatenritory Grade 31 Staple35 cotton. For this explanaon, tis is calledRaw B. 3. The Current ShippingDiferntial (CSD) for dte week was detmine by subcting Raw A from Raw B. The CSD is used in the calculationof the tansportatio diffntial componentof the AWP. Eachweekes CSD become the cumrrenobservation in a set of CSDscovering the previous twelve months. The movingaverage of these observain is used to arrive at the transt differentialcomponent for the current weel's AWP.

Prior to the changesin te methodof calcaing this component,all obsevions fiaing in the monts of June,July, and Augdst were omttd fromthe 52 weekperiod. Ths the ansportdifferetial componentwas not actuallya 52 weekmovimg averge but an averageof theobsvato whichoccaured withinthe last 52 weekperiod, excluding12 to 13 weeks. At any time, only about38 obserations were actly being averaged,and during the mons of June throughAugust,the transotati differetdal remained constant

Under the new medtd of calculation,all 52 observationswere used withoutte omissionof the June to Augustdata fromthe calculationof the averageCSDs. The actual nsoraon cost walso considered to He within a band of values with a midpoint at 13.1 centsipound. The midpoint is not consta but is dtmined annuallytirough a USDA survey of shippers. The CSD in a given week occs in a band whih is no lower than85 peret of the midpoint(11.14 cents/pound)and or no higher than 115percent of the midpoint(15.07 cespound). If tie CSDin a givenweek exceeded ether of these extremes,the etreme valuewas takenas that week'sobservaon andthe ubstitd CSD was averagedinto the 52 weekcaverage for the cuaeat week.

In both cases,in anyweek, quotes which fell on a holidaywere removed from the calculon

Ewltion of the 1985Food Secrky Act

The chrnlogical evolutionof the 1985Food and Seuity Act (FSA)and key aminisve changeswere as follows:

Aug. to Nov. I95 Fam Programdiscussions and emergenceof the Bil as pendinglegisLion Dec. 23, 1V6 The U.S. Food SecurityAct of 1985was signedby PresidentReagan. Feb. 12, 1986 Inentory Protcon Certifct programwas annunced. Mar. 6, 1986 The proposedfomua for the AdjustedWodd Price (AWP)was anounced. -98- Apr. 24,1986 Tbe AWPformula was finalized. The 198Ccrop was tobe bi under Plan A. The loan rate was set at 55 ces/lb, with a loan repyment rate of 44 cents, and a targetprice of 81 cents. Jun. 6, 1986 Detailsof the CertificatePrograms were announced. Nov. 1, 1986 Detailsof 1987crop programwere announced. Ihe 1987crop basicloan rate was set at 52.25 centslb. withan ARPof 25 percentand no paid lad diver- sion. The target price was announcedat 79.4 cesm/lb. Detals of the loan repaymentrate and marketingplan were delayed. Mar. 20, 1967 Fial detailsof the 1987/88upland cotton program were annuced. Plan B was selectedwith a loan repaymentrate set at the lower of 52.25 cts/lb. or the AWP. No fixed repaymentrate was set even if the AWP fell below 80 percentof this level, or 41.80 cents/lb. Loan deficiencypayments coud be madeto producerswho agreedto forgothe loan whenthe repaymentrate was below the loan rate. Up to 50 percentof the paymentswere to be made in marketingcertificates. Oct. 29,1967 Main provisionsof the 1988/89crop programwere announced.The target price was set at 77 cents/lb.The basic loan rate was set at 51.80 ctsflb. An ARP of 12.5 percent was announced.The loan repaymentrate was to be dministeredunder Plan B with loan deficiencypayments to be made to producerswho agreedto forgothe loan whenthe repaymentrate was below the loan rate. Up to 50 percentof the paymentswere to be madein marketn certificates. Aug. 19,1988 Long-awaitedatrdminisative hanges to the cottonprogram were announced: 1) The transportationadjustment in the AWP formulawas alteredto reflect a 52-weekaverage difference betwee N. Europeanand U.S. spotmaret quotationsfor 31-35s(A 156-wLavg. diffenc was fomerly used). 2) The "coarsecount adjustmen ctor was modifiedby: a) mwving the 1.00 centlb. b) makingthe adjustnt applicableto any grade stapling 1-1/32" or shorterand to selectedlower grade staplingl-1116' or longer.These grades are white grades (60, 61, and 71), light spottedgrades (52 and 62), spottedgrades (33, 43, 53 and 63), tinged grades (24, 34, 44, and 54), yellowstained grades (25 and 35), light gray grades (46) and gray grades(37 and47). The Secretaryof Agriculturealso agreedto permdtredemptions using the loan scheduleof pre i and discountsin effect for the crop year in which the cotton was produced. Aug. Z2,1988 h Admistrtive changes to the program affecting cash redemptios were announcedas follows: 1) When the AWP is below the loan rate forthe base quality of 52.25 cents/lb.for 1987 cropand 51.80 cents/lb.for 1988 crop uplandcotton, the CCC would not require the paymentof any accruedinterst on the loan, and wouldpay all warehousecharges (except compres). 2) If the AWP was betweenthe base loan.level and the toa of accrued 499 interestand storagechages, the CCC wouldforgive enough of the ineest andstorage to permitredemption at theAWP. Octe31,1981 The main provisionsof the 1989/90crop programwere aouned. ITe targetprice was setat 73.4 centsilb, thebasic loan rate at50.00 cents/lb, nd the ARPat 25 percent.No paidland diversion was implemented.Tbe Im repaymentrate was to be adminiteredunder Plan B. Loan deficiencypay- mentswere to be madeto producerswho agreed to forgothe loanwhen ihe repaymentrate wasbelow the loan rate. Loanswere allowed to be redeemed cash free of enoughcary as necessaryto enable redemptionat the AWP. The AWP wasto be adjustedfor qualityand base locationaccording to 1989 crop price support program schedulesfor grade, stple, micronaire,md coare countadjustments. Nov.21, 198 Ihe sup period for the 1989 wheat, feedgrain,and uplandcoon progms wereanounced to run fromDec. 19, 1988through Apr. 14, 1989. In addition,for the periodDec. 19, 1988through Feb. 3, 1989,produer coulddedare their intentions to plantfrom 10 to 25 percentof eachprgm crp's perited acreageto soybeansor sunflowersand stll protectthat programcrop's area base history. With regrd to disasterldrought provisionsof the FSA,it wasannounced dta uplandcotto producerscould participatein the 50/92deficiency payment program. OCtobe 3,169 The USDA annuced th paymentof accruedcharges at the me of cah la repossessn, regardlessof the prevailinglevd of the AWP, was requiredfor loansextended upon expiration of theirinitial 10 month term for 1989/90crop Uplandloans. If otutonwas forfited to the CCC, accrued eightmonthstorage charges plus a 1.00per balefee had to be paidby the grower. TheSecretary of Agriculturewas authorized to adjustthe formulacalcuated AWPby as muchas thediffrence beteen thefive-day average of thelowest quotationfor US M 1-3/32' CIF NorthEuropean ports and the weeldy averageof the cheapestfive M 1-3/32*CEF North European quotatons if the flowing criteriawere met: TIhe fiveday rageof the lowestUS grwth (CIFNorth Europe) was higherthn thefive-day average of thecheapest five CEF North European quotatn, and * 'Theprevaing formulacalculated AWP was less than115 percent of the 50 centper lb 1989/90loan rte for SLM1-1/16 at averagelocaton.

The 1990Food, Agcltue, Conservaion, and Trade Act (FACT)

Eventhough manypovisions of the 1985FSA weresimply built on, the 1990FACr was a dramaticdeparture fm previus legisationinasmuch as the newfarm bill madeproducer's planting decisionsmuch more dependenton marketprices thanprogram benefits of previous legislat In additon,the targetngof supplyand utiizaion provisionsfor all majorcrops were legislated. At the oute theUSDA simply addressed the major provisions in the1985 PSA that it wouldlike to seechanged -100- Istad of submitlmga doSetd proposalto Congress.The fna FarmBill wu simlr to tde orin USDAproposals albeit somewhat mor reticdve.

MhmUSDA proposed a Nonral CropAcreage (NCA) which is defineda the sumof the 1as acrea basesof progrm cropsplus historicl reageof oilseeds.Acreap ReduedonProgam (ARP) wer to be as d individuallyfor eahcrop. To qualifyfbr programbenefits, dhe sum of al NCA-cropacreae plusacreage se wideunder the ARPs which were reamed h Arage Conseraton Resers (ACRa),could not exceodte farm'sNCA. A structue wouldb esalished to cmpewate produces accordingto hitorical acreageof programcrops by givingdtem *flecibllit to plS in responseto marketsradher tn in responseto government-determinedincentives or policies.

Mhm1990 Farm Bill allowed produces to plantup to 25 percn of eachprogram crop bas on theirfam to specifiedcrops without losing base acreage. This 25 percentwas subdivided into two part calledNormal Flex Acreage(NFA) (15 percentof the base)and OptionalFlex Acreag (OFA)(10 percentof dte base). NFA productiondoes not receivedeficiency payments but has low rate price proteton and marketig loanbenefits. OFAproduction does not receivethe beneit of goverment prgrams. Hence,a fam's bae acrage couldbe viewedas havingfour separate components: th ACt (AcreageConeation Reserve),NFA, OFA and payment acres ater a maximm flex. The Maxmum Paymet Acr weredefined as the paymentacres after the maxifmmflex plus dte OFA. Thisgave ris to theso-caled trie-boseWwhich is dmplytie paymentbase as somepercent of a produrs hiscal crop base. Notedth producersreceive payments on OFAif and onlyif this acreageis planed to th odginal programcrop- -Th triplebaseor paymentacres wil be somewherebetween the payment acres aft a maxmumflex and the paymentacres plus the OFA if al OFA acreageis plantedto the origind programcop.

A budg resolutionutainc atd the spenin targetsset by congressionaland admi i ngoia uringdthe weeked of Septber 30, 1991,resulted in tie BudgetReconciliation Act. The budgetresolution pusod back automaticacross-the-board spendin cuts frommidnight October 5 to midnightOcober 19, 1991. Varis resional commi approvedlegislation tat produceddt saing specifiedin the budgetagreemen The appropriatonscommittees oDnsidered the 13 speWing bills thafunded the g ment,whie conformingtD thebudget resolution. The triple-be andthe NormalFlex Acresprovision were inoporated in the Acc Agriculua programswere cut by about onebMion dollars in fiscalyear OM 1991and by aboutthirtee billiondollars over the five years of the 1990Farm Bi. Fmalcongressional apprval wasgiven on October19, 1991.

The followingcrops can be plantedon a progrm crop'sacreage base: 1. Anyprogram crop definedas wheat(except winter wheat for FY '91), feed gran, Uplandcotto, or rice; 2. Any oilseeddefined as soybe, sunlmowerseed, rapeseed,flaseed, canola,and sa1ffoweror any odter ollseeddesinated by the Secretaryof Agriculure 3. Anyindusial or experimentalcrop including adzui, faba, andlupin beans; 4. Other crops, includingcrops not designaedby the secretaryas (1) industrialor Perimental, or (2) a cropfor wiuch O substant prducon or maret exists; nad S. Mug bean. Proibited crps cludefruit or vegetablecrops (mcluding potatoes, dry ediblebeans, lentils, -101- and peas) or any other crop prohibitedby the Secretry. Each year a list of crpi prohibitedby th Secretaryof Agriculturemust be made available. Prohibkotdcrops in 1992 ncludoepeanuts, nuts, tobacco,trees, tree crops, and wildrice.

The 15 percentreduction of the historicalbuaes lown u NormalFlex Acrage (NFA)applied to all programcrops (feedgrain, wheat, cotoon, nd rice for FY911FY9Swith the exceptionof winter wheatfor FY91). Winterwheat grwsfr FY91 hadthoion of eitherusing a 15 perconttriple base or a change in deficiencypayment calculaon from th current 5-monthaverage price to a 12-month averageprice. Anyprogram crop andlor olseeds plusall non-programcmps exceptfruits andvegetables couldbe plantedon triple base acreage.

1990Farm BiU ProWsonsCommon to al Producers

(a) Ptaning on AcreageConsrion Resewre(AC) The USDAhas discretiont permit oilseeds,program crops, or other cropsto be plantedon up to one-halfof the ACR with loss of paymentsdetrmined by the USDA. The USDAhas dsction to allow non-programcrops and oms to be plantedon up to 100percent of the ACR.

(i) AcreageConsetion ReservwACR) The produceris requiredto plant at least 50 percentof the ACQnot to exceedfive percentof the base to an annual or pereniall with a cost share of 25 percenton peremial cover crops. Hayingand grazing is allowedfor reducedacreage cept during any consecutivefive monthperiod bween April 1 and October31 as designatedby the StateASCS Commit. The resticion under the 1985FSA of havingan adverseecomnoic eflict was removed.

(c) Target Oo Program(TP) TOP implementationis d onay withthe USDA.If implemented,the producerhas the option to adjust he ARP (now kmo as ACRs)upwards by 10 percentagepoints to a tal incase of 25 percentsor downwardsby no more th one-halfof the ACR for an increase or decreaseoi 0.5 to one percentfor eachpectage changein the ACR percentage.In eFct, tis discretionaryprovisionaLws prodcers to either increaseor decrse their ACR and recive lower or higher deficiencypayments.

(d) ConservingUse Acrage (CUA) This appliesto acreageidled unter the 50192provisions. Planting on the CUA is at the discretion of the USDAfor non-pogam crps and minoroilseeds.

(e) PaymentLmon s Three enfftes are permitted. There is a $50,000per person limit on deficiencyand diversion paymens combined,a $75,000per person paymentlimitation on marketingloan gains, one-halfARP payments,and Findley grain paymes, and a $250,000aregte limk on all payments. Beneficial interestprovisions were modifiedto a range of zero to ten percentwith the USDA gim authorization to maked ation on a case-by-casebasis. The eligibilityof an irrevocabletrust is determinedby an establi t date prior to 1987or a life of 20 yearsor longer.

(0 AdvancePaymR s Ihe USDA must provie advace paymentsof 75 percen of the differencebetween projected totalpayments and advanceddeficiency payments for wheatand feedgrains by December1S. Deficiency -102- paymentprovisions for cottonare unchangedfrom the 1985FSA.

(a) Adly Paym s The 'Findley' adjustmentto the loan rate appliesonly to wheatand feedgrains.

Secplc OQp Provi ons

(a) Wl*m ad Feedgraiw Target pricesand yidds are frozenat 1990levels. Loa ras are set at 85 percentof a five year movingaverage with the highand the low yeas dropped,a zeroto ten percentreduction based on stocks- tous, and an additionalten percentdiscretionary adjustment to maintaincompetitiveness. The maimum loan rate declinefor any one year is ten percent.ARPs or CRPsare determinedas follows: 1. 1991 * 15 percentor greaterfor wheat * sevenand one-halfpercent or greaterfor feedgrains. 2. 1992n1995 * Wheat: If stocs-to-use are greaterthan 40 percent,a 10 to 20 percentAP is requiredand if stocks-touse are less than or equal 40 percent, a zero to 15 percentARP is required. * Corn:If stocks-to-useare greaterthan 25 percent, a 12.5 to 20 percentARP is required. If stocks-to-useare less than or equal to 25 percent, a zero to 12.5 ARP is required. klce:The marketingloan is continued.Target prices and program yieldsare fozen at 1990levels. Loan rate dermination is identicalto that contaned in the 199SFSA. The ARP of zero to 35 percentis detemiaed by the sto klevd relativeto 16.5 to 20 percentof previousthree yeas disaance.

3 Soybeans: The soybean loan rate is SS.O2bush with a two percent loan origiton fee that effetvely reducedthe loan rate to $4.92 per bushei. If the marketprice for soybeansexceeds the loamrate the loan rate plus interestmust be repaid Under the 'Matteting Loan' if prices fall below the loan rate, the producerpays back the loanat the Potd CountryPrice (PCP). Furthermore,if pricesfail to less ta 105peet of the loan, producers whosigned up for the ten percentflexibility option would not be allowedto plot beanson the flexibiliy acreageor wouldreduce soybeanflexibility acreage by a pro-ratacut equa to the maket price decline below 105 percentof the loan.

(1) CottonSpecific Proviskon 1. ARP (OCP)and Socks-to-Use and Paid Land Divrsion (PLD):Te USDAshal setthe ARP at zer to 25 percentin orter to acbievea 30 percentstocks-to-use. A PLD is autorized of up tOD15 percentat a rate of not less than 35 centsper poundrequired when endingstocks are projectedto be eight millionbales or more. Ihe USDA may allow producersto chooseany levelbetween zero and 15 percent 2. IRection Progm: This 8 the discetnay so-calledone-h AlP where -103- paymentsmay be madeIn the fonr of marketingcertificates. 3. Programand Loan AnnouncementDaes: The fil loan rate and the prelimLiaryARP is to be announcedby November1. The final ARP is to be announcedby January 1. Uproducersin early plantingareas (definedas 24 SouthernTexas counties) are disadvan- tagedby any changein the final ARP,they may complywith the programannouncements of November1 as determinedby the Secretaryof Agriculture. 4. TargetPrice: The target price was frozenat the 1990 levelof 72.9 cents/poundfor the 1991/1995crop years. S. ProgramnYlelds: Program yields were froze at the 1990 level. 6. Loan Rare:The loan rate determinationremains identical to the procedurecontained in the 1955FSA. 7. AdjustedWorld Price (AWP):The AWPcalculation was left unchangedfrom the method last modifiedby the AdministrativeChange of August 19, 1988. S. Loan Defdiency Payments (LDPs- also known as POPs): The 1985 legislationis modifiedby makingthe LDPs mandatoryrather than optionaland basingthe payment (definedas the differencebetween the loan rate and the AWP whenthe AWP is below the loan) on the basis of actualproduction rather than a producer'spayment yield. The LDP allowsproducers to receivethe paymentas definedabove by foregoingthe loan on loan eligibleproduction. 9. 50/92and 0/92 Provisions:50J92 is continued,i.e. producerswho plant at least 50 percentof permittedarea can receivepayments of up to 92 percentof paymentacres. 0/92 is requiredwhen planting is prevented. 10. AdvancedDeficiency Payments: USDA is required to advance 30 to 50 percent of estimateddeficiency payments if requestedby the producer. 11. CropAcreage Base (CAB):The base is defined as the average acreage planted and consideredplanted for three precedingyears exceptas follows: * non-participantswho certifiedacreage for 1989and 1990may use the 1985FSA rule for 1991. * Producerswho do not participatein 1990or 1991may use 19I5 FSA rules for 1992. * No base-buildingmay occur on farms for any crop if any cropon these farms is enrolledin the program. 12. Loan Period:The loan period remainedthe same as last modifiedby the Administrative Changeof October3, 1989,i.e. an initialten-month non-recourse loan withan optional eight-monthextension period. 13. MarketingLoan: Ihe marketingloan as definedby the 1985FSA was modified.Plan A and Plan B are combinedand the USDAis given the optionto set the loan rate at any level from 70 to 100 percentof the loan rate. First-handlercertificates are to be issued for the differencebetween the AWPand 70 percentof the loan rate. 14. CoWmtitveAdjustment to theAW!P: Tbe adjustmentsto the AWPbecame kmown as Steps I, H, and m even though Step U can occur without Step I or all Steps can occur -104-

slirMdtu3ly. * Step 1: Th simplycodifies the October 1989USDA announcemetthat givs the USDAdiscredonary authorty to adjustthe AWP under certin conditons. * Step HI:Certificatu ar Issuedto domesdcusers and exportes equal to the amunt that the lowestU.S. price landedNortherm Europe exceeds te cheapet fivecomparable growth (IncludingU.S.) landedNorthem Europe by more than one g onequarter cnts per poundfor four consecutiveweeks. * &ep m: Stopmprovides for aspecial import quotaIf Step II price conditions adjustedfor the cortificatevalue exist for ten consecutiveweeks. 15. Cross Complianmcand Offstenng Compliace: Cross complince and offsetting compliancecannot be requiredas a conditionfor programbenefits. 16. Loan Prendum nd Discoums:The definitionof 'r;se quantity s changedto On detrmind by the Secretary'. a 1:1 ratio is retained. Premiumsand discountsdo not have to balance. Other adjustmentfactors such as strengthmay be added. 17. CCCSales Policy:CCC sales shallbe madeon the basisof competitivebids at not less than 11S percentof the lower of the loan rate plus appropriateadjustments, or loa repaymentrate. Cotton cannotbe sold for exportfor less than it is sold for domestic WM. 18. Conseed: If It is determinedthat any oilseedprogram or programscause, or is likely to cause a reducton in the price of cottonseedor cottonseedoil, then the Secaetarymust act to raise the price of cottonseedwithout decreasing the price of other oilseeds. 19. SIp Row ProWslora:30 inch rows are to be taken intoaccount for classifyingacreage plantedto cottonand acreagenot plantedor "skipped*. References

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__ .1993d. Backgroundiformaton for ICACDiscussion of CottonPolces in Cdna(Malda. Washington,D.C. Lele, U., N. Waile,and M. Gbetichou.1989. "Cotton in Africa:Analysis of DifferingPeufruno.. MADIADiscussion Paper. Washington, D.C.: WorldBank. Lin, I., R. Burcroff,and G. Feder. 1991. 'From Plan to Marketin ChineseAgriculture.' In L. Garbus,A. Pritchard,and 0. Knudsen,ods., Agricutural Issues in the 9IJs. Proceedingsqf dte EleventhAgriadlre Sector Symposium. Washiogton, D.C.: WorldBank. Masson,R., and P. QulIS, eds. 1976.Essays on IndustralOrganiadon In Honorof Joe S. Bak. Cambridge,Mass.: Bellinger. Munro,J.M. 1988.Coton. 2nd ed. TropicalAgriculture Series. New York: John Wiley & Sons.

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Ahricide Pesticidefor the controlof spidermites AcidDelinng Treatmentof ginnedcottonsoeed by wet or dry processwith lfuric or hydrcbloricacid to removethe lintes andfur whenpreprn plnting seed. AmericanEgyptian Varietiesof the speciesGosopin barbadeusedeveloped in theUSA Cotton fom Egyptan lines. See Pima ApparenConsump Domesicmill consumption of cottonplus the fiber equivalent of importsof cottonmanufactur mimsexports of cottonm rers. BaciUlusahurlnglnsls A bacllus which produces an endotoxint disturb the metabolsmof Lepidopteralarvae when ingested, leading to death. BioPestiides Pesdcidesproduced from disease organisms that ata insectpestB sch a Bacdllusthurtnglnsls BiologicalControl Controlof insectpests by theirnaal enemies. BonlWeevil Anahonomusgrandis, a weevi foundin North and SouthAmeica that developsin the cottonboll, feeding on the developingseeds. Bollworm Severalspecies of Lepidopteradtat feedon cottonboLls. BotanicalPesticides Plantproducts such as extacts of the NeemTree that have insectcia properties. Braconherbaor A parasiticwasp that parasidzes the larvae of variousLepidoptera. canuas Strong,firm, compactfabric usualy made of cotton,jue, flaxor hempin plain or double-endplain weaveof singleor plied yarn. Ibe mass ranges from200 to 2,000gWim. CardedYarn Yamsmade from fibers that havebeen caded to removeshort fibers ad impuritiesand to forma webduing the manufacing proces. ChemicalContrl Controlof insectpests through the use of chemicalpesticides. Ourysopacana Commongree lacewing.Also known s the goldeye lace wing or qphid lin. Predatoron aphidsand the eggsand young stges of otherpests. CombedYar Yas madefrom fibersthat havebeen combedafter cardig to remow additionalshort fibers and impurities during the maNg processto makethem smoother and more regular. Con Bale A packageof compressedcotton lint after ginnizg,tied with wire or metal bandsand wrapped in cotton,jute or polypropylene.Bales vary in weight in difrt countiesbut the nivers densitybale weig 220to 225kg, has a densityof 448 kg/mnand measuresnominaly 1.400 X 0.53X 0.69 m. CottonBolls Thefruit of the cottonplat Usuallydivided into throe to five segments, locs or loxules. CottonBollworm Alsoknown as Americanbollworm. The larval stage of HdOfif anlgera or H. zea (America),a majorpest of cotton nd a widerange of altenative host plas in most cotn producingcountries. Larvaefeed on buds, flowersand bolls. Cotnn Gin A machineused for sepaatingthe cottonfiber from the seed CottonGinning Mheprocess of sepaatg the cottonfiber from the seed. Coton Lint Cotonfiber that develops as anextesion of cels in thewals of developing couTonseed Cottonseed Mmeseed of the cottonplant -110- Cultur Control Controlof cottonpests throughcultural means such as ipulaon of th plantingdate to escapeinsect attack Denim Warp ficed heavycotton twill madefrom yar-dyed warp and undyodweft or flling yams. (bluejeans) Desi Cotton Old Worldcotton of the species G(osrln arborewmand G. herbacax, grownmainly in SouthAsian countries. EconomicAction The level of iect infestationin a crop at whichcontol meaures are Level necessaryto prevent economiclosses. EconomicThreshold The level of insectinfestation in a crop abovewhich economiclosses wM 0oc. EgyptianCotton Long Staple and Extra Long Staple cotton varieties of the species Gossypiumbarbdense developedin Egypt. ELS Cotton ExtraLong Staplecotton. Staplelength 1 3/8' or above. EndotDxin A toxin that requires ingestionto becometoxic. Fiber Fineness The outsideperimeter or outsidediameter of the fiber. Fiber Maturity he degreeof wall thickeningof the fiber. Fine Ftoered Cotton LS and ELS cottonproduced from Gosspm barbadnsc vareti in the CentralAsian Republics of the For er SovietUnion. Flower Termaor Chemicalsdt trinate floweringand hasten opein of bolls neaing maurity. GeneticEngineering e tansfer of genetic characters between species to enhace e performanceof the recipientspecies in somespecific charactristc. Glands Structuresthat looklkle blackspots in the seedsand aboveground portions of the cottonplant. Gossypol A substancethat is toxic to non-ruminantanimals and is one of die main -constiuentsof the glands Herbicide A chemicaldeveloped to controlunwamted vegetation eg. weeds. Huls The outer shell of cottonseed HVI Test Line High volume instrumenttest lines for rapid aemet of fiber lngth, unifrity, micronaire,strength, elongion, color and trash cont Hybrid Variety A variety in which the planting seed is the first or second geneon folowing a cross betweentwo breedinglines. 1PM IntegratedPest M geme is a systemof pest cootol. Iterplantingor A secondcrops plated betweenthe rows of the primarycrop such as Intercropping mungbeans planted between rows of cot. InterspecificHybrid A hybrid betweenlines or varietiesof differentspecies. Iraspecific Hybrid A hybrid betweenlines or varietiesof the samespecies. Leaform Lepidoptealarvae that feed on the foliageof the plat Lepidoptera Butterfliesand motls. Linters The sort fibers remainingon cottonseedafter ginning. LS Cotton LongStaple cotton. Stapleiength 1 1/8' to 1 5116'. MachineDelinting Mechanicalremoval of linters from the surfaceof cottonseed. Male Sterile Plan that have been bred to producesterile male flower components. Micronaire A measureof the crosssecuionalsize of the individualcotton fiber. Mites Minutepests relatedto spidersthat feed on the undersideof leaves. Motes Undevelopedseeds. Muslin Plain weavecotton fabric. Mutaton Breeding Breeding systems in which chemicals or radiation are used to create mutions in the genetc system. -111- Natural Control Controlof insectpests exertedby naturalphenomena such as winterfreeze, rainfall etc. Nematicide Pesticidefor the controlof nematodes. Nematode Microscopicwornlike creatures that attack the roots of plants. Some species cause galls to form (root knots) while others restrict root development,in both casesleading to loss of yield and quality. Neps Smallclusters of usuallyimmature fiber, often attachedto a seed fragment (seedcoatnep). New World Cotton Varietiesof cottonof the species Gossypiumhirsuaum and G. barbadee which had their centerof origin in the New World. Non CellulosicFiber Man-made,organic, synthetic polymer base fiber eg. Polyester(introduced 1941). Oil Expeller Screw press for pressingoil from vegetableoil seeds. Oil Expression Pressingoil from the seedof vegetableoil crops, includingcotton. Old WorldCotton Varietiesof cottonof the species Gossypiumherbacewn and G. arboreaa which had their centerof origin in the Old World. Pesticide Chemicalsfor controllingpests. Photosynthetic A measureof the abilityof the plant to utilize efficiency availablesunlight for photosynthesis. Pima Cotton varietiesdeveloped in the USA from importationsof seed from Egypt Plant Growth A chemicalsubstance that influencesthe developmentof the plant and Regulator regulatesthe lengthof the branchesand main stem. Polyester Man-made,synthetic polymer base fiber introducedin 1941 and utilizedin filament(condnuous) or stapleform. Polypropylene Man-made, synthetic polymer based fiber widely used for packaging. Contaminationof cottonlint with this materialcan cause seriousproblems during textle manufacture. Podioling The practiceof makdngholes at intervalsthrough the field to reducerm-off and increasewater infiltration. Pyretbroid Botanicalpesdcides extracted from the daisyspecies Pyrethrum. RelayCropping The practiceof sowinga secondcrop betweenthe first crop shortlybefore the first crop is ready for harvesting. Restorer A mechanismfor restoringthe fertility of male sterileprogeny of a hybrid betweena normalparent and a malesterile parentline. Scarto Fiber recoveredfrom incompletelyginned seed cotton, scatteredfiber and gLmerysweepings. Seedc%nton The productof the cottonboll consistingof the seedswith the fiber attached before ginning. SelectivePesticides Pesticidesthat are specificfor one or a limitedrange of target pests. StructuralElasticity Percent changein an economicvariable (eg. quantityor area associatedt a one percentchange in anothervariable (eg. price or income),with oher variablesheld constant. SynDheticCellulosic Man-made,organic, natural polymer base, cellulosebase Fiber fiber eg. Rayon (mtroduced1890). SynhfeticPyrediroid Synthetcaly manufactured pyredhrins which generally have greater persistencethan the naturalproduct. SystemicPesticides Insecticidesthat are absorbedinto the vascularsystem of the plant and are then ingestedby insectswhen they feed. -112- 7Wldiogra spp. Smallparsitic waspsthat can be artificiallyreared on te wheatmoth and then released to reinforce the wild populationas a biological control measureagainst Lepidoptera. Tied Ridges A system lnwhich the cropIs plantedon ridge with tiesat regularinevals joining adjacentridges to createa seriesof smalldams to minimizerun-off md facilitatewater infiltration. Trap Crop Aaltenative host plantto particularpest speciesplanted to siphonthe pest off the main crop plan. UplandCotton Varietiesof the speciesGwsspwx hirsatum. Whitefly Bemeslaspp. that feed by suckingfrom the foliage of cottonplants and secretehoneydew which causes stickiness in cotton lint. Yarn Count Measure of the fineness of yarn expressed as mass per unit of length (guis/km) (direct system) in denier or tex or as length per unit mas (idirect system)in N. the numberof 840 yard hanks per pound. Distributors of World Bank Publications

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No. 198 Teerinkand Nakashima,WaterAllocation, Rights, and Pricing: Examplesfrom Japan and the United States No. 199 Hussi, Murphy, Lindberg,and Brenneman, TheDevelopment of Cooperalivesand OtherRural Organizations:The Roleof the World Bank No. 200 McMillan,Nana, and Savadogo,Settement and Developmentin thteRiver Blindness Control Zone: CaseStudy BurkinaFaso No. 201 Van Tuijl, Improving Water Use in Agriculture:Experiences in the Middle East and North Africa No. 202 Vergara,The Materials Rewolition: What Does It Meanfor DevelopingAsia? No. 203 Cleaver,A Strategyto DevelopAgriculture in Sub-SathranAfrica and a Focusforthe WorldBank No. 204 Barghouti,Cromwell, and Pritchard,editors, AgriculturalTechnologiesfor Market-Led Development Opportunitiesin tze 1990s No. 205 Xie,Kiuffner, and Le Moigne, UsingWaler Efficiently: Tecmnological Options No. 206 The World Bank/FAO/UNIDO/lndustry FertilizerWorking Group, Worldand RegionalSupply andDemaand Balancesfor NVitrogen, Plhsphate, and Potash, 1991/92-1997198 No. 207 Narayan,Participatory Evaluation: Toolsfor Managing Change in Waterand Sanitation No. 208 Bindlishand Evenson,Evaluation of thePerformanceofT&V Extension in Kenya No. 209 Keith,Property Tax: A PracticalManualfor Anglophone Africa No. 210 Bradleyand McNamara,editors, Livingwith Trees:Policiesfor Forestry Management in Zimbabwe No. 211 Wiebers,Integrated Pest Management and Pesticide Regulation in DevelopingAsia No. 212 Frederiksen,I3erkeof., and Barber,Water Resources Management in Asia, VolumeI: Main Report No. 213 Srivastavaand Jaffee,Best Practicesfor Moving Seed Techlnology: New Approaches to DoingBusiness No. 214 Bonfiglioli, Agro-pastoralismin Chadas a Strategyfor Survival:An Essayon the Relationshipbetween Anthropologyand Statistics No. 215 Umali,Irrigation-Induced Salinity: A GrowingProblemfor Development and the Environment No. 216 Carr,Improving Cash Crops in Africa:Factors Influencing the Productivityof Cotton,Coffee, and Tea Grownby SmaUlolders No. 217 Antholt,GettingReadyfor the Twenty-First Centhry: Technical Caange and Institutional Moderniation in Agriculture No. 218 Mohan,editor, Bibliographyof Publications:Technical Department, Africa Region, July 1987 to December1992 No. 219 Cercone,Alcohol-Related Problems as an Obstacleto theDevelopment of HumanCapital: Issues and PolicyOptions No. 220 Kingsley,Managing UrbanEnvironmental Quality in Asia No. 221 Srivastava,Tamboli, English, Lal, and Stewart,Comserving Soil Moisture and Fertility in tireWarm SeasonallyDry Tropics No. 222 Selvaratnam, Innovationsin Higher Education:Singapore at tle ConpwtitiveEdge No. 223 Piotrow,Treimnan, Rimon, Yun, and Lozare,Strategiesfor Famil:, Planning Promotion No. 224 Midgley,Urban Transport in Asia:An OperationalAgendafor the 1990s No. 225 Dia, A Gornance Approachto CivilService Reform in Sub-SaharanAfrica No. 226 Bindlish,Evenson, and Gbetibouo,Evaluation of T&V-BasedExtension in BurkinaFaso No. 227 Cook, editor, Involuntary Resettlementin Africa:Selected Papersfrom a Conferenceon Environmentand Settleent Issuesin Africa No. 228 Websterand Charap, TheEmeergence of Priate SectorManufacturing in St. Petersburg:A Surveyof Firms No. 229 Webster,T7h Emergence of PrivateSector Manufacturing in Hungary:A Surveyof Firms No. 230 Websterand Swanson,The Emergence of PrivateSector Manufacturing in the FormerCzech and Slovak FederalRepublic A SurveyofFirms The World Bank Headquarter. European Office Tokyo Office 1818 H Street, N.W. 66, avenue dlIena Kokusai Building Washington, D.C. 20433, U.S.A. 75116 Paris, France 1-1 Marunouchi 3-chime Chiyoda-ku, Tokyo 100, Japan Telephone: (202)477-1234 Telephone (1)40.69.30.00 Facsimile: (202)477-6391 Facsimile: (1)40.69.30.66 Telephone: (3)3214-5001 Telex: wui64145woRLDsBmK Telex: 640651 Facsimile: (3)3214-3657 RcA 248423 WORWSBK Telex: 26838 Cable Address: INrUAFRAD WASHJNGIONDC

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