Chapter 8. Cocoa and cotton commodity chains in West Africa 265
Figure 5 compares cotton producer prices to the A index on a lint basis in CFA per kilogram. The
extent to which parastatal gins stabilize farmgate prices is even more evident for cotton than for
cocoa. While there was substantial variability in world prices from 1970 to 1993, farmgate seed
cotton prices remained steady, with step increases in domestic prices following world price increases
around 1975 and 1985. In 1995, as world prices in domestic currency increased again, due largely to
CFA devaluation, farmgate prices were raised, but a substantial relative difference persisted, especially
when world prices were very high. When world prices declined, especially after 1995, domestic cotton
prices remained constant, and the shrinking margins have led to losses for gins. Currency matters to
these trends - cotton prices measured in CFA have been in steadier decline since the mid -1990s than
they appear to be in US dollars (as in Figure 1).
Figure 5. Cotton Producer (Farmgate) Prices Compared to the A index, 1970-2007
Sources: FAO, FAOSTAT, 2010 and Baffes, 2007 for farmgate prices. Prices are in Fcfa per kilogram, seed cotton
basis.Baffes, 2007 for A index fob West Africa in seed cotton basis.
In the cases of both cocoa and cotton, comparisons of farmgate prices to world prices suggest that
margins could be reduced in order to improve farm income. Many studies simply use this sort of price
information to argue for marketing interventions to improve farmer welfare, noting large differences
between farmgate and consumer prices. But there are significant transaction, transformation and
processing costs along the value chain. Nevertheless, the fact that these margins shrink when world
prices decline and expand when world prices increase suggests there may be some scope for reduc-
tion of these margins. Whether margin reductions would translate into higher farmgate prices will be
explored below.
0501001502002503003504004501970 1975 1980 1985 1990 1995 2000 2005A index
Burkina Faso
Mali
Côte d'Ivoire