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In the international market for ginned cotton, the EU is considered as a small trading country accounting for around 5 percent of world imports, with Southeast Asia and Brazil being the main import markets. Beside the negative trade balance, the EU has increased its self-sufficiency rate from 25 percent in 1990-92 to 52 percent in 2000-02. On the other hand, USA is the prime exporter accounting for 30 percent of the world market, even though its market share has dipped since 1980. The main producer countries are China, USA, India, Pakistan and Uzbekistan. In the last 20 years there has been no real trend towards concentration, and the ordering of major producing countries has remained more or less unchanged. The share of the aforementioned countries remains stable around 75 percent of the world production. Yield increases have been the main source of output growth worldwide. In particular, yields have been doubled in the last 40 years.[1]

In the EU, Greece and Spain are the two primary cotton-producing Member States. Even though there are no significant yield differences between them, Greece is by far the largest supplier of cotton producing around 3 to 3.5 times more than Spain, or 75-80 percent of Community's total production (see Table 1). In Greece, cotton accounts for 9 percent of the country's total agricultural output, while the corresponding figure for Spain is only 1.5 percent. In both countries, the main production areas are very localized. The three main production regions in Greece are Thessaly, Macedonia-Thrace, and Sterea Ellada. In Thessaly cotton accounts for 60 percent of arable land and in Sterea Ellada for about half of arable land. In Spain, the main production regions are Andalusia, especially the provinces of Seville and Cordoba, and Valencia.

In both countries cotton is grown almost entirely on irrigated land using drip irrigation techniques, and with harvesting machines now being available everywhere thanks to the EU start-up and investment aids. The cotton sector in Greece is characterized by a large number of growers (71 600) and small, highly specialized farms, with an average area of 4.9 ha. Specialization is much more in evidence in the main production areas of Thessaly and Sterea Ellada. In Spain, the number of cotton growers is smaller (7 600) but cotton farms are apparently larger (an average area of 12.0 ha) and specialization is also strong.

According to FADN data, the cost/cash margin is highest in Andalusia, Spain about €1 864/ha.[2] In Greece, the margin is highest in Sterea Ellada, about €1 800/ha and lower in Thessaly, about €1 540/ha, and in Macedonia-Thrace, about €1 400/ha. These figures refer to highly specialized farms where cotton production accounts for over 75 percent of the total farm output value, while it is expected to be lower for more diversified farms. The higher absolute profitability of cotton in Andalusia and Sterea Ellada is due to much higher production values because of higher average yields. In addition, cotton exhibited higher relative profitability compared to competing crops, such as maize in Thessaly and Sterea Ellada, and maize and durum wheat in Andalusia and Macedonia-Thrace. This explains farmers' preference for cotton in areas where water supply is sufficient.

The other important counterpart in cotton sector is ginners. There are about 75 ginning firms in Greece, 20 of which are producer cooperatives involved in the industrial processing of raw cotton. Total ginning capacity is only slightly above actual Greek production, implying marginal under-utilization of existing capacity. In Spain there are 22 ginning firms, 10 of which are cooperatives. However, there is ginning over-capacity relative to supply.

[1] A more detailed discussion on the issues of world cotton market can be found in Baffes (2004).
[2] Cash costs include specific costs and general expenditures but they do not include depreciation or the cost of labor, paid and family.

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