Increasing incomes of Malian cotton farmers: Is elimination of US subsidies the only solution?
In a WTO battle and the press the argument is often made that eliminating US cotton subsidies would have a large effect on the incomes and competitive position of farmers in developing countries. In Francophone West Africa cotton productivity has stagnated after rapid gains in the first two decades following independence (1960-1980). A farm model was constructed based on farmers' definition of their decision-making framework which they use to respond to income and weather risks. With this model the effects on farmers of eliminating US subsidies are compared with various productivity increasing measures for cotton and sorghum in Dioila, Mali. Dioila is located in a representative cotton region producing 16% of the cotton in Mali. We include sorghum due to its importance for consumption and the observation of Malian farmers substituting cereals (sorghum and maize) for cotton as the returns to cotton have fallen in the 21st Century. In the farm model, the elasticity of transmission of a change in the world cotton price to the farm gate price is taken into account. The gains from eliminating US subsides are small. In contrast, the various technological alternatives including Bt cotton introduction, the use of higher fertilization levels for cotton, and the introduction of improved sorghum cultivars and moderate fertilization along with a marketing package all have substantially higher returns Even with substantial improvement in the mechanisms enabling farmers to benefit from the higher prices resulting from elimination of US subsidies, there are still much higher returns resulting from the various types of productivity increases.
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