CAMEROON'S COTTON SECTOR IN PAIN

UNCLAS SECTION 01 OF 02 YAOUNDE 001032

SIPDIS
SENSITIVE

STATE FOR AF/C, AF/EPS AND EEB
ALSO PASS TO USTR FOR BILL JACKSON


E.O. 12958: n/a
TAGS: EAGR ECON ETRD CM
SUBJECT: CAMEROON'S COTTON SECTOR IN PAIN


1. (U) Summary: Cameroon, the seventh largest cotton producer in
Africa, has seen the sector decline steadily since 2005. Contacts
at Sodecoton, the government cotton parastatal, recently told the
Ambassador and Emboffs that this was a result of lower world prices
for raw cotton, a spike in fertilizer prices, uneven rains and low
productivity. Sodecoton hopes for government subsidies in the short
term but notes that the Government of Cameroon (GRC) has
historically been unresponsive to the needs of the sector.
Cameroon's cotton woes have pushed more than 100,000 people out of
the sector, which accounts for up to 40 percent of cultivation in
the impoverished north of the country. End summary.

Cotton in Context
--------------


2. (U) In 2007, Cameroon was the fifth largest producer of cotton
in the CFA zone. In 2002, cotton production represented only 1.3
percent of Cameroon's GDP. However, in the three northern provinces
of Far North, North and Adamaoua, it accounts for 20-40 percent of
total cultivation (depending on the area) and employs over 300,000
farmers. The main buyers of Cameroon's cotton are China, Vietnam,
India and Italy, which purchase 53,758 tons, 2,650 tons, 2,055 tons
and 1,842 tons respectively. Cameroon also exports cotton to other
countries in Europe and Asia, as well as elsewhere in Africa.
Supplementing raw cotton exports are the products from Cameroon's
nine cotton fiber processing factories and two cotton oil plants.


3. (U) There are two key players in Cameroon's cotton sector:
Sodecoton and OPCC-GIE. Sodecoton is a parastatal operating in the
three provinces of the Grand North; with 59 percent state ownership
and 30 percent ownership by the French company DAGRIS. Its mandate
is to promote cotton cultivation among local farmers, and to process
cotton fibers and oil as well animal feed. OPCC-GIE is an
organization of cotton producers created in July 2000 to protect the
interests of cotton farmers. OPCC-GIE has more than 1700 adherent
groups and sells much of its raw cotton to Sodecoton.

Sectoral Pains
--------------

4. (U) In a recent meeting with the Ambassador and an Embassy team
visiting Garoua, the capital of North Province, Sodecoton Deputy
General Manager Henri Clavier reported that total cotton production
and land used for cultivation more than doubled between 1990 and
2005, when production peaked at over 300,000 tons. Production has
since dropped steadily, he said, from 221,000 tons in 2006 to
141,000 tons in 2007. Sodecoton anticipates a slight recovery in
production in 2008, at 160,000 tons.

5. (U) Nonetheless, Clavier estimates that Cameroon's profits from
cotton production dropped from $75 million in 2004/05 to $15 million
in 2007, and he expects the industry to run at a loss in 2008/09.
Average profits per hectare of cotton cultivated reportedly fell
steadily in the past three seasons to 53,640 CFA francs ($115) per
hectare in the 2007/08, less than half the 135,900 CFA ($292)
average between 2000 and 2005. Production of other crops grown with
cotton (sorghum, corn, ground nuts and others) has also dropped
during this period.

6. (U) The sector has been hit by several challenges at once. The
purchase price of Cameroonian cotton has been declining, from 190
CFA/kg in 2004/2005 to 175 CFA/kg in 2007/2008. Local contacts
blame falling global cotton prices resulting from increased global
production, decreased demand from China, and high competition from
synthetic fibers. Meanwhile, the global price of fertilizer has
been steadily rising, causing farmers to use less of it. This
together with uneven rains resulted in a substantial drop in cotton
productivity in Cameroon during this period, by almost 400kg/hectare
- about one third. Farmers in the region have abandoned some 20,000
hectares, or 15 percent of cotton sown.

The Way Forward
--------------


7. (U) Clavier highlighted the need to improve productivity of
cotton in Cameroon through training, investments in equipment, and
better management techniques. He also saw the need to diversify
sources of fertilizer and encourage crops which need less
fertilizer, although he saw these as long term goals.


8. (U) However, with the tripling of fertilizer prices between
October 2007 and September 2008, he argued for a $30 million
government subsidy. He also hoped the GRC would create a $70
million rolling fund to help finance and cushion risk in the sector.
Without such a response, he argued that "the future of cotton
production is in question."

Comment

YAOUNDE 00001032 002 OF 002


--------------


9. (SBU) Clavier commented that the government has not
historically been responsive in the cotton sector. During the
Ambassador's recent trip to the north, other contacts acknowledged
the challenges of cotton but voiced optimism that Cameroonian
producers would persevere. In an impoverished region with little
industry and mainly subsistence agriculture, the survival of the
cotton crop is key to the economic viability of the north, at least
until there is greater diversification of agriculture in the
region.


10. (U) While Sodecoton officials noted that U.S. cotton subsidies
contribute to the pain of the sector here, other contacts did not
raise the issue, as they had in past visits. This may result from a
lack of awareness of the issues facing cotton but also seemed to
reflect fatalism about poverty in the north.


11. (SBU) The sector also suffers from a fundamental lack of
innovation, either in production methods or in management
techniques. The General Manager of Sodecoton, Iya Mohamed, is also
the President of the Cameroon Soccer Federation, another challenging
full time job. As a result, Sodecoton lacks the full-time
leadership at the top needed to get through its present
difficulties.

GARVEY