Background to reform of the EU cotton regime

The EU support regime is centred on a production aid per tonne of unginned cotton within national guaranteed quantities. Aid is granted to processors, who pay a minimum price to growers, based on the difference between the 'guide price' and the world price. Since 1995/96 the 'guide price' has been set at € 1,063 per tonne with a guaranteed minimum price of € 1,009.9 per tonne. Greece has a NGQ of 782,000 tonnes, Spain an NGQ of 249,000 tonnes and other member states a total of 1,500 tonnes. EU support to the cotton sector totalled € 773 million in 2001. The cotton sector contributes only 0.5% to final agricultural output in the EU, but is important in certain EU regions (Thessaly, Macedonia-Thrace, Sterea Ellada and Andalusia. For example in Greece, cotton represent 9% of total agricultural output. In these areas cotton is farmed by small holders. The area under cotton however is decreasing. At a world level the EU is a minor producer, contributing only 2.2% of total production (the USA by contrast accounts for 20.1% of world production). The EU exports some 227,000 tonnes of ginned cotton and is a major net exporter of ginned cotton. The USA however dominates world cotton exports, accounting for 30% of world trade (west Africa accounts for only about 11%). The EU consumes about 1 million tonnes of ginned cotton per annum. Comment: The guaranteed minimum price system means that regardless of the world market price EU cotton growers receive over € 1,000 per tonne for their cotton. This insulates EU producers entirely from the low world market prices for cotton which have plagued west African cotton producers. Since 2000 EU imports of cotton have declined as EU production and exports have increased (despite a 13.5% decline in the price of ginned cotton). This demonstrates the extent to which production and trade in cotton in the EU is insulated from developments on world markets.The EU support regime is centred on a production aid per tonne of ..