ICAC Cotton Subsidies Report

The 2023 ICAC Cotton Subsidies Report highlights the significant impact of government assistance on the global cotton industry, emphasizing how subsidies influence cotton production, trade, and pricing. Since 1997/98, ICAC has monitored and reported on subsidies affecting cotton markets, revealing a consistent negative correlation between subsidies and cotton prices—when prices drop, subsidies increase to support farmers. In 2022/23, global cotton subsidies reached $8 billion, representing a 66% increase from $4.8 billion in 2021/22, demonstrating the critical role of subsidies in stabilizing production.

Key Findings on Global Cotton Subsidies

The report also confirms the direct link between subsidies and price fluctuations, emphasizing how market protection mechanisms influence global cotton prices. In 2022, the Cotlook A Index peaked at 135.25 cents per pound, driven by strong demand and logistical constraints. However, in 2023, as subsidies increased and production stabilized, the index fell to 101.62 cents per pound, reflecting the ability of subsidies to maintain production even when prices decline. This dynamic has led to an uneven playing field, where cotton producers in countries with subsidy programs can afford to sustain production regardless of price drops, while those in Mozambique and other non-subsidized nations remain fully exposed to market risks.

Mozambique stands at a clear disadvantage, as it lacks a structured cotton subsidy program. While other African nations—such as Benin, Burkina Faso, Mali, and Côte d’Ivoire—have some level of financial assistance for their cotton sectors, Mozambique relies entirely on market-driven revenues, leaving smallholder farmers vulnerable to production losses, price crashes, and climate shocks. The absence of government support limits investment in technology, innovation, and productivity improvements, further widening the gap between Mozambique and other global cotton producers. To enhance competitiveness and ensure long-term sustainability, Mozambique must consider adopting stabilization mechanisms, financial support models, and policy interventions to provide a safety net for farmers and strengthen its position in the global cotton market.

The main key finding are:

Global Subsidies Distribution:

China, India, and the U.S. are the largest cotton subsidy providers.
83% of world cotton production receives some form of government assistance.
China’s subsidies in 2022/23 totaled $2.4 billion, while India’s reached $2.97 billion, and the U.S. provided $1.64 billion.

Impact on Cotton Prices:

In times of low market prices, subsidies prevent mass production declines.
The Cotlook A Index price fluctuated significantly, peaking at 135.25 cents per pound in 2022 before falling to 101.62 cents per pound in 2023, reinforcing the role of subsidies in market stabilization.

Mozambique’s Disadvantage:

Unlike major producers, Mozambique operates without a subsidy system, leaving its farmers vulnerable to market volatility and production risks.
African nations, including Benin, Mali, Burkina Faso, and Côte d'Ivoire, receive various forms of financial assistance, but Mozambique remains excluded, limiting its global competitiveness.

The ICAC report underscores the critical role of subsidies in ensuring cotton sector stability. Without government support, countries like Mozambique face severe economic disadvantages, struggling to compete with heavily subsidized producers. Policymakers must explore mechanisms for financial support, price stabilization, and industry incentives to protect smallholder cotton farmers and enhance Mozambique’s position in the global market.

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RESET Foundation is committed with the The Sustainable Development Goals (SDGs). The ICAC Cotton Subsidies Report are closely linked to several SDG:

The SDG's, also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.