Agriculture Newsletter – June 2013

http://agritrade.cta.int

Contents ACP FTAs _____________________________________________________________________________ 2

Jamaican companies concerned over possible loss of preferences on Canadian market ___________ 2 Barriers to intra-regional agricultural trade in West Africa reviewed ___________________________ 3

ACP regional trade _____________________________________________________________________ 5 Preferential rules of origin affect trade within regional trade agreements ______________________ 5

Product differentiation _________________________________________________________________ 7 Going organic seen as way forward in Vanuatu ____________________________________________ 7 French company seeks trademark rights for rooibos tea, as EU use of GIs expands _____________ 8 Legal and regulatory constraints on GI protection illustrated _______________________________ 9 Fairtrade launches strategy to expand sales to £2 billion ___________________________________ 11

Food safety __________________________________________________________________________ 12 South Africa looking for ‘parallel dispute resolution processes’ in EU citrus dispute _____________ 12

Commodities: General _________________________________________________________________ 13 How to make the most of agricultural commodities _______________________________________ 13 Changes to commodity markets will have lasting price effects ______________________________ 14

Cereals sector ________________________________________________________________________ 16 Constraints on regional cereals trade in West Africa reviewed _______________________________ 16 Strengthening supply chains could boost cereals production in Ethiopia ______________________ 17 Temporary export bans and GMO policies complicate Zimbabwe maize procurement ___________ 19 Impact of reforms on the EU cereals sector ______________________________________________ 20

Cotton sector ________________________________________________________________________ 22 Decline in cotton stocks could support prices ____________________________________________ 22

Cocoa sector _________________________________________________________________________ 23 Jamaican cocoa farmers’ incomes boosted by pragmatic solutions while legislation is pending ____ 23

Dairy sector __________________________________________________________________________ 24 Review highlights role of agri-cooperatives in strengthening farmers’ position in supply chains and reducing price volatility ______________________________________________________________ 24

Horticulture sector ____________________________________________________________________ 26 Senegal refines its onion import regime _________________________________________________ 26 Kenya–Tanzania SPS dispute on flowers in transit resolved _________________________________ 27 Trends in the global citrus trade _______________________________________________________ 28

Poultry sector ________________________________________________________________________ 29 Better information sought on retailer plans to boost sector development _____________________ 29 Regional expansion of poultry companies intensifies trade policy debates in Namibia ___________ 30

Sugar sector _________________________________________________________________________ 32 Tate & Lyle Sugars argues for improved access to low-cost non-ACP cane sugar supplies _________ 32

Interview: Points of view from ACP–EU stakeholders _______________________________________ 34 Laurent Pipitone: “The ICCO is working to address the flaws in market mechanisms” ___________ 34

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ACP FTAs

Jamaican companies concerned over possible loss of preferences on Canadian market

According to press reports, Jamaican exporters are concerned over the possible imposition of higher duties on exports to Canada “if CARICOM fails to reach a new trade agreement” before the end of 2013. Their concern is that the current non-reciprocal preferences under the Caribbean–Canada Trade Agreement (CARIBCAN) regime would be challenged in the WTO once the current waiver runs out. Two main export products have been identified that could be adversely affected, namely pepper sauce and rum.

In 2011, Jamaican rum exports to Canada were valued at US$11 million. Canada was also the “single largest export market” for two brands made by J Wray and Nephew, and there is seen to be considerable scope for expansion of rum sales in Canada. However, if current preferences are lost, Jamaican rum exports would face an additional duty of 25c/litre.

Pepper sauce exports in 2011 earned US$1.5 million, and the exporting companies see good prospects for expanded sales across Canada, particularly among the Caribbean diaspora community. The loss of current preferences, however, would result in additional duties of 9.5% being charged on Jamaican pepper sauce exports to Canada.

Unsurprisingly, retaining duty-free access to the Canadian market is accorded high priority by the companies concerned. However, the Jamaican private sector remains concerned at the relatively slow rate of progress in trade negotiations with Canada, particularly since the agreement not only needs to be concluded before the end of 2013 but also ratified.

A new agreement could also open up new export opportunities for Jamaican exporters in areas that currently attract high duties. These include: sweet biscuits (2.7% tariff); processed or tinned cheese (245.5% tariffs plus special dairy import licence requirements); vegetable preparations and flavoured extracts (96% duty); malt extract with less than 10% cocoa (106% duty); and a range of non-alcoholic beverages.

Currently Canada is “the second biggest market for Jamaica’s food exports, behind the United States”.

According to the CARICOM Secretariat, “the current trade negotiations are designed to ensure that exporters that depend on the CARIBCAN for duty preferences into Canada… have stable duty-free access into Canada.” By February 2013, four rounds of negotiations had been held. However, the Canadian government is reportedly “seeking a significant amount of reciprocity” in the new agreement. Canadian negotiators are also looking to strengthen compliance with the country’s food safety regulations. This latter dimension of the negotiations is seen as requiring an increased level of private sector participation, in order to ensure the agreements reached are practical for local operators.

Sources

Jamaica Observer, ‘Exporters face threats, opportunities in Canadian market’, 8 February 2013 http://www.jamaicaobserver.com/business/Exporters-face-threats--opportunities-in-Canadian-market_13535776

Comment

While securing a WTO-compatible basis for continued duty-free access to the Canadian market is of growing importance, the prospect of an imminent loss of access hinges on a successful challenge in the WTO to any extension of existing non-reciprocal preferences.

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To date, no such challenge has been launched against US renewal of non-reciprocal preferences under the United States’ African Growth and Opportunity Act (AGOA), and no challenge was launched against the EU’s expedient use of interim Economic Partnership Agreement (EPA) arrangements, despite the non-application of most of the reciprocal commitments contained in these agreements since they were initialled at the end of 2007.

The Canadian authorities would therefore appear to have scope for further extending the existing waiver, particularly if progress was being made in the ongoing process of FTA negotiations.

Taking the time necessary to complete complex aspects of negotiations, such as those related to the design and application of food safety regulations, would appear to be essential, particularly in view of the need to ensure consistency between US and Canadian food safety requirements. If compatible systems for food safety compliance were applied by Canada and the US to Caribbean exports of food and agricultural products, this could reduce the costs incurred by Caribbean exporters in meeting the requirements of these two markets.

Getting to grips with this issue would be greatly facilitated by accelerating the implementation of donor-supported programmes aimed at fast-tracking the operational establishment of core Caribbean Agricultural Health and Food Safety Agency (CAHFSA) activities.

If these food safety issues can be dealt with as an integral part of the agreement, this could contribute to ensuring that nominal market access translates into real market access under a reciprocal trade agreement.

Barriers to intra-regional agricultural trade in West Africa reviewed

In January 2013, a conference was organised by ECOWAS and USAID in Ghana on the free circulation of food products in that region. The objective was to identify measures to be implemented to ensure that regional agricultural trade promotes food security in West Africa. A background document on the volume and value of agricultural trade in the region, prepared by USAID, focused on trade in cattle, onions, cereals (millet, sorghum and maize) and rice along trade corridors linking nine ECOWAS countries (Benin, Burkina Faso, Côte d’Ivoire, Ghana, Mali, Niger, Nigeria, Senegal and Togo). Several information notes were also prepared on specific issues affecting intra-regional trade (e.g., harassment of road hauliers, export restrictions, rules of origin certification, non-recognition of equivalence in sanitary and phytosanitary (SPS) controls, and application of VAT to agricultural products).

The nominal elimination of tariffs on intra-regional trade in food products was noted. However, the limited application of these commitments was highlighted, partly as a result of non-recognition of originating status (linked in part to repackaging and relabelling of imported raw materials, such as Asian palm oil) and partly as a result of shortcomings in the design and application of the ECOWAS trade liberalisation scheme, with its complex system of product registration.

The main background document highlighted the dominance of informal trade in West Africa, estimating that “official statistics probably capture about one-fourth of actual transactions, in value.” A lack of harmonisation of VAT rates charged on agricultural products was also highlighted, and early harmonisation was therefore recommended.

Conference participants highlighted the following priority areas:

the establishment of a network of effective and responsive hotlines to report on anomalies;

better training for custom officials and monitoring of their functioning;

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use of digital cashless systems at borders;

distribution of a community guide on trade regulations and establishment of information

centres for the private sector, as is currently being initiated by the Borderless Alliance;

empowerment of ECOWAS or WAEMU “to impress sanctions on member states for non-

application of regional commitments”.

A study by French development NGO GRET on the main obstacles to regional agricultural trade in West Africa and the EAC, published in December 2012, identified a number of problems and areas for action in West Africa. These included:

improving transport and communication infrastructures, both regional roads and links

between the main production areas and main regional markets;

removing obstacles to efficient transport logistics management;

removing de facto the non-tariff barriers to regional trade, including through the introduction

of sanctions for non-compliance;

supporting the development of smallholder farms, agro-food small and medium enterprises

(SMEs) and the structural development of food supply chains;

enhancing the political leadership at regional level to ensure effective support to sector- and

product-specific development strategies;

supporting increased participation of civil society and professional organisations in order to

improve policy formulation and implementation.

Sources

USAID, ‘Estimation des volumes et de la valeur du commerce régional des denrées de base’, prepared for conference on ‘Free circulation of food products in West Africa’ of 29–31 January 2013 http://www.inter-reseaux.org/IMG/pdf/Josserand_-_Estimation_des_volumes_et_de_la_valeur.pdf

http://www.inter-reseaux.org/IMG/pdf/Josserand_-_Assessment_of_ATP_E-ATP_Trade_Data.pdf

Inter-réseaux, ‘Conférence sur la libre circulation des produits alimentaires en Afrique de l’Ouest (CEDEAO/USAID) : les communications’, point of access to materials relating to the conference organised on 29–31 January 2013 in Accra, Ghana, 28 February 2013 (in English and French) http://www.inter-reseaux.org/ressources-thematiques/article/conference-sur-la-libre

ECDPM, ‘Barriers to trade in agricultural goods: Let’s focus on solutions, not on problems’, Talking Points blog article, 22 February 2013 http://www.ecdpm-talkingpoints.org/barriers-to-trade-in-agricultural-goods-lets-focus-on-solutions-not-the-problems/

GRET, ‘Comment promouvoir le commerce agricole intra-africain ? Analyse des pistes et des freins pour le développement de ce commerce ‘, December 2012 http://www.gret.org/wp-content/uploads/Comment-promouvoir-le-commerce-agricole-intra-africain1.pdf

Comment

West African countries have identified a list of priority commodities in their National Agricultural Investments Plans (NAIPs) to guide future investment priorities. Given that many of the priority products are common to most West African countries, efforts are under way to promote regional trade to enhance regional food security.

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In view of commitments made at the regional level to free movement of agricultural products, many of the nationally implemented restrictions are not systematically documented. This gives added importance to initiatives such as the Borderless Alliance and similar initiatives that seek to track and address obstacles to intra-regional agricultural trade.

Proposals for the “establishment of a network of effective and responsive hotlines to report on anomalies” will need to be backed up by the establishment at national level of effective institutional capacities to respond to and progressively eliminate the identified obstacles to trade. Digitisation of payments could greatly facilitate this process, although it would not completely remove the possibility of corruption.

These steps need to form part of wider investments aimed at systematically removing identified barriers. In addition:

the redesign of national rules and regulations, within a commonly agreed regional framework, needs to be systematically supported and monitored;

national enforcement mechanisms need to be strengthened and their performance monitored;

these need to be backed up by investments in infrastructure to improve national compliance with regional standards (a particularly important issue in the food safety and SPS field).

These national-level actions need to be accorded priority, with regionally coordinated actions progressively raising the bar for compliance, while the private sector plays a critical role in monitoring and ensuring enforcement of agreed commitments.

ACP regional trade

Preferential rules of origin affect trade within regional trade agreements

According to a WTO Secretariat Staff Working Paper published in March 2013, rules of origin “are increasingly becoming an economic, political and trade instrument,” and their effect goes well beyond the economic “raison d’être of… the avoidance of trade deflection”. In parallel with stringent rules of origin, there has emerged a tendency to establish specific flexibilities for particular groups of states (e.g. LDCs) or particular goods on either a temporary or permanent basis. One consequence is that “preferences are sometimes actually provided by the rules of origin themselves, instead of the preferential tariff treatment.” This, the paper considers, is because the “standard” rules of origin are so rigid as to restrict trade, making the the countries benefiting from the flexibilities an attractive base for investors seeking to take advantage of the regional trade agreement (RTA).

The study embraces “192 RTAs covering trade in goods notified to the GATT/WTO up to 1 November 2010”. Although this wide coverage means that many of the examples cited refer to non-ACP agreements, reference is made to Cameroon, CARICOM, the CARIFORUM–EU Economic Partnership Agreement (EPA), CEMAC, COMESA, Côte d’Ivoire, the SACU–EFTA free-trade agreement and the South Africa–EU Trade, Development and Cooperation Agreement (TDCA). Moreover, the non-ACP focus for much of the detailed description of rules of origin means that the report is particularly useful for ACP trade policy makers in identifying the range of provisions to be found in the preferential agreements not only of the EU and USA, but also of China and Latin America.

The paper describes the rules of origin provisions in such agreements, noting many widely recognised key features (such as the method of establishing whether imported inputs have been

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sufficiently transformed, and provisions for cumulation) as well as more technical details (such as whether duty-drawback is allowed with bilateral or cumulated trade).

The study also brings together some of the research on the extent to which preferences have been used in practice, the role of onerous rules of origin in explaining any under-utilisation, and the margins of preference afforded to beneficiaries. However, the section on margins of preference excludes most of the trade regimes available to ACP states from the analysis.

One feature that is flagged is “the burdensome nature and trade-impediment aspects of multiple rules of origin”. This is of particular contemporary relevance, in view of the continued proliferation of RTAs, a process to which the EU is contributing, as noted in the EC memorandum of 25 March summarising the state of the EU’s free-trade agreement negotiations. It is also particularly important, given that one of the candidates for the post of WTO Director-General, during a recent visit to Nigeria, expressed the view that the spread of RTAs is making multilateral rules obsolete.

A second feature flagged in the paper is that the while well-established, large producers navigate rules of origin reasonably well, small businesses face problems in utilising RTA preferences because of rules of origin complexities. The WTO working paper highlighted the need for simplicity. It cited approvingly the pledge of the Economic Commission for Africa that the African Continental Free-Trade Area should include not only tariff reduction or elimination commitments, but also the “creation of simple and transparent rules of origin”, through the “simplification and harmonization of rules of origin in all the RECs [Regional Economic Communities] and among them”.

Sources

WTO, ‘Preferential rules of origin in regional trade agreements’, working paper, March 2013 http://www.wto.org/english/res_e/reser_e/ersd201305_e.htm

EC, ‘The EU's free trade agreements – where are we?’, MEMO/13/282, 25 March 2013 http://europa.eu/rapid/press-release_MEMO-13-282_en.htm?locale=en

This Day, ‘Blanco: Free trade agreements are rendering WTO rules obsolete’, 21 March 2013 http://www.bilaterals.org/spip.php?article22880&lang=en

Comment

As African leaders and trade officials grapple with the twin challenges of finalising the EPAs and harmonising the differing rules of origin in the existing RTAs that are to be superseded by a tripartite and then an All-African RTA, the technical report published by the WTO Secretariat is timely. While the WTO paper does not go into much detail at the level of industry, it does offer a well-researched guide to treatment of rules of origin under a large number of RTAs, and as such provides a solid point of reference for policy makers in reviewing current trade arrangements and negotiating new ones.

Rules of origin can adversely affect the agro-food sector. One example of this is the new temporary agreement reached in March 2013 in the SADC–EU EPA context, on cumulation arrangements for the Swazi canned fruit sector, which permits the limited use of South African-sourced raw materials. Such cumulation arrangements can be critical in sustaining and, in some instances, promoting investment in processed food products, where production is seasonal.

This example in the agro-food sector is particularly illustrative, since rules of origin discussions often focus on a few easily understood features, such as the share of the final value of a good that must be produced within the RTA member in order to qualify for preferences. These are rarely helpful, since what is commercially feasible varies hugely between industries and across countries.

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The finding in the WTO working paper that one agreement requires 30% local value addition, compared to 40% elsewhere, might suggest that the former has “better” rules of origin than the latter. However, this would be irrelevant if the commercial norm in an industry were 25% local value addition.

In the agro-food sector, where raw material supplies are often seasonal, at certain times of the year imports may be required to maintain a commercially viable level of capacity utilisation (an EU example would be Italian tomato purée canning facilities). Failing to take this on board under RTA rules of origin may require operators to behave in a commercially non-viable manner in order to benefit from preferences extended.

The observation that the spread of RTAs is making multilateral rules obsolete highlights the wider importance of the newly launched EU–US negotiations on a TransAtlantic Trade and Investment Partnership, in which rules and standards are seen as being of critical importance (see Agritrade article ‘Discussions on standards in EU–US trade negotiations carry global implications’, 4 May 2013).

Product differentiation

Going organic seen as way forward in Vanuatu

According to press reports, “Vanuatu has started to convert its largest coconut plantations to organic”. This move forms part of the Vanuatu Sustainable Agri-Business Initiative (VASABI) that was launched by the government in association with a range of support organisations, including Australia Organic. At present, “Vanuatu Virgin Coconut Oil is certified and Coconut Oil Production Santo Ltd is working to achieve organic certification.” Vanuatu producers are planning to sell “virgin coconut oil, crude coconut oil and copra meal (dried coconut kernel) to Australia, New Zealand, the European Union and the USA”. One of the lead organisations involved, African Pacific, projects annual production of 400 tonnes of organic virgin coconut oil and 1,000 tonnes of organic crude oil.

While coconuts in Vanuatu are already produced without any application of synthetic fertilisers, they have not to date been certified organic and as a consequence the producers have until now been unable to target “the premium-priced organic market sector”. World Vision’s Project Coordinator commented that “organic represents a new and exciting market opportunity for Vanuatu and its farmers.” Currently, around 60% of the rural population of Vanuatu are involved in coconut production, with 85% of the country’s population of 234,000 involved in farming activities.

The aim of the broader VASABI initiative is to “achieve full organic certification in 2015”, with coffee and cocoa plantations next in line to go organic, followed by the livestock sector.

Sources

Australian Organic, ‘Vanuatu coconuts go organic’, 8 March 2013 http://www.organic-market.info/web/News_in_brief/World_Trade/Vanuatu_coconuts_go_organic/176/199/0/14154.html

Ausfoodnews.com, ‘Island’s coconuts converting to Australian Organic status’, 25 February 2013 http://www.ausfoodnews.com.au/2013/02/25/island%E2%80%99s-coconuts-converting-to-australian-organic-status.html

Biological Farmers of Australia, ‘Vanuatu coconuts go organic’, 26 February 2013 http://www.gohospitality.com.au/c/Biological-Farmers-of-Australia/Vanuatu-coconuts-go-organic-n2502684

Fiji Times, ‘State stays out of Fairtrade’, 2 April 2013 http://www.fijitimes.com/story.aspx?id=229841

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Comment

For small island nations such as Vanuatu, converting the entire agricultural sector to organic production could offer major economic gains in terms of minimising inputs costs, reducing certification costs and developing a unique brand identity. If the island can become synonymous with natural (organic) high-quality production, this could considerably enhance the capacity of agricultural producers to gain price premiums on overseas markets.

However, the enormity of the task of converting the 14 main islands (out of 83) that make up Vanuatu to organic systems of agricultural production should not be underestimated. Currently, there is a thriving intensive market gardening sector serving local food markets and the growing tourism sector and a commercial livestock farming sector.

Moves towards wholesale conversion to organic farming will require the sincere and comprehensive buy-in of all stakeholders (both national and international), since the enforcement of organic standards will be critical to the success of such an ambitious programme.

For effective enforcement, community engagement will be critical. This is illustrated by recent developments in Fiji, where breaches of Fairtrade production requirements among sugar farmers supplying the Labasa Sugar Mill on Vanua Levu were reported from within the community itself, leading to an investigation and corrective measures by Fairtrade International.

French company seeks trademark rights for rooibos tea, as EU use of GIs expands

According to press reports, in February 2013 the South African government began to take action in response to efforts in 2012 by a French company to “register a number of trademarks incorporating the terms ‘South African Rooibos’ and ‘Rooibos’.” South Africa’s Business Day reported that if the French company were successful, “it would own the exclusive rights to the names of any rooibos products sold in France, a key market in the European Union, which is the biggest export market for rooibos.”

According to the reports, “this is not the first time a foreign firm has attempted to capture the intellectual property associated with Rooibos”, as there was a similar case in the United States in 2005. The South African Department of Trade commented that “rooibos tea is made from the leaves of a unique shrub, indigenous only to South Africa”, and the Minister of Trade and Industry, Rob Davies, said that the department has committed itself to vigorously defending South Africa’s trade and intellectual property interests, and is urgently reviewing “the legal options to strengthen protection of the Rooibos name in South Africa”.

In March, the EC posted an evaluation of the commercial value for agricultural products and foodstuffs, wines and spirits protected by geographical indications (GIs). A geographical indication is defined by the EC as “the name of a product where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin”.

According to the evaluation, the estimated “average value premium rate in the EU27” for “agricultural products and foodstuffs” is 1.55. This means that GI-protected “agricultural products and foodstuffs” on average attract over one and a half times the price of the same volume of non-GI-protected products falling in the same category (e.g. hams). For wines and spirits, these values were higher (2.75 and 2.57 respectively). The total value premium of EU27 GIs for “agricultural products and foodstuffs” was estimated at €5.6 billion in 2010 (the corresponding value for wines was €19.3 billion and for spirits €4.9 billion).

The EU system of GI protection continues to be dominated by wines and spirits (70.9%), while agricultural products and foodstuffs account for 29.1% of total sales. The sales value for GI-protected agricultural products and foodstuffs, however, showed stronger growth between

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2005 and 2010 (+19%) compared to the overall growth in sales of EU GI-protected products (+12%). By 2010, GI-protected products accounted for around 5.7% of the total sales value of the EU food and drink sector.

According to the EC, France accounts for 38.4% of total GI sales value, 51.7% of total value of EU GI protected wine sales, 25.7% of spirit sales and 19.3% of the value of GI-protected agricultural products and foodstuffs sales.

While export sales of GI-protected products amounted to €11.5 billion in 2010, only 9% of these were agricultural products and foodstuffs, with Italian cheeses dominating this sub-component. By 1 January 2010, some 867 EU agricultural products and foodstuffs enjoyed GI protection, with a further 285 applications pending at the end of February 2013.

Sources

Mail and Guardian, ‘Government objects to French firm’s attempts to trademark rooibos’, 22 February 2013 http://mg.co.za/article/2013-02-22-dti-objects-to-french-firms-attempt-to-trademark-rooibos

EC, ‘Value of production of agricultural products and foodstuffs, wines, aromatised wines and spirits protected by a geographical indication (GI)’, Executive Summary, October 2012 http://ec.europa.eu/agriculture/external-studies/2012/value-gi/summary_en.pdf

EC, ‘Q&A: European Commission study on the value of EU GIs’, MEMO/13/163, 4 March 2013 http://europa.eu/rapid/press-release_MEMO-13-163_en.htm

EC, link to all aspects of the evaluation ‘Value of production of agricultural products and foodstuffs, wines, aromatised wines and spirits protected by a geographical indication (GI)’, March 2013 http://ec.europa.eu/agriculture/external-studies/value-gi_en.htm

World Intellectual Property Organization (WIPO), ‘In search of a perfect cup’, web page, undated http://www.wipo.int/ipadvantage/en/details.jsp?id=2612

Comment

While trademarks and GI protection operate under different regulatory frameworks and give rise to different issues, the growing commercial value of GI-protected products and the additional income which can be generated for producers under GI schemes highlight the growing economic importance of ACP governments defending their “trade and intellectual property interests”. The rooibos case is a good example of why this is important.

While action is commonly most necessary at the sectoral and national level, in view of the often disproportionate costs that can arise for relatively small producers, there would appear to be scope for collective ACP action in identifying strategies for cost-effectively promoting the defence of ACP “trade and intellectual property interests”. Under what conditions, for example, does it make sense to pursue GI registration rather than trademark protection? Jamaican Blue Mountain Coffee producers have traditionally used trademark protection regimes, but have more recently “taken steps to register Jamaica Blue Mountain Coffee as a GI with the Jamaica Intellectual Property Office (JIPO)”.

Collective ACP action could focus on identifying the conditions under which different types of intellectual property protection (trademarks, GIs or other forms of quality-based product differentiation) should be sought in order to maximise net returns to primary producers.

Legal and regulatory constraints on GI protection illustrated

Given that the rooibos industry in South Africa “has an estimated R600 million turnover [€48.8m] and employs 4,500 people”, there is some confusion as to why comprehensive moves to register rooibos as a ‘geographical indication’ (GI) or a trademark have not been initiated sooner. Seven

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years before recent French corporate efforts to register rooibos as a trademark, a similar case arose in the United States.

According to an article in South Africa’s Business Day, Soekie Snyman, Coordinator of the Rooibos Council of South Africa, argued recently that the Council had “found it difficult to determine how best to protect the tea”. This was particularly the case since “South African law did not cater for geographical indications”, while EU rules “demand that a geographical indication be protected domestically before the EU accepts it”.

The article notes that the Rooibos Council is now fast-tracking the registration of rooibos as a collective trademark. Similar moves are expected from the South African Honeybush Tea Association. The Council hopes that receiving “official trademark status in South Africa” will be sufficient for the EU to extend GI protection to rooibos in order to combat efforts by the French firm Compagnie de Trucy to obtain exclusive marketing rights, which “could affect South African exporters in any international market”.

The South African government has now sent a communication to the EU seeking “protection of ‘rooibos’, ‘honeybush’ and ‘Karoo’ as geographical indications under the economic partnership agreement between South Africa and the EU”. According to the EC’s economic and trade counsellor in South Africa, the extension of such protection will form part of the EPA negotiations.

Sources

Business Day, ‘Government moves to protect rooibos in EU – eight years on’, 27 March 2013 http://www.bilaterals.org/spip.php?article22924

IPS, ‘Storm in a teacup between EU and South Africa’, 15 April 2013 http://www.ipsnews.net/2013/04/storm-in-a-teacup-between-the-eu-and-south-africa/

Comment

The delays in registering rooibos as a GI in South Africa highlights a broader difficulty faced across the ACP, namely the absence of national legal frameworks for GI protection. In addition to a national legal framework, there must also be a national entity designated with responsibility for registering GIs, with guidelines for the registration of products drawn up and widely publicised. As the South African example illustrates, these are not always in place in ACP countries.

This is not a simple issue, as there are costs involved in establishing the legal and institutional framework for GI enforcement. These costs may only be warranted if a sufficient number of products and value of production is to be afforded GI protection. For example, by 1 January 2013, some 2,768 products were registered in the EU as GIs, with a total value of €54.3 billion. By February 2013, registration of a further 285 “agricultural products and foodstuffs” as GIs was pending (see Agritrade article ‘French company seeks trade mark rights for rooibos tea, as EU use of GIs expands’, 12 May 2013).

The huge coverage of the EU’s GI scheme transforms the economics of establishing and enforcing GI protection, so that producers’ associations can effectively secure the premium prices available. It contrasts sharply with the situation in ACP countries, where only a handful of products may potentially benefit from GI protection and where even in these sectors, producers may only be loosely organised. The lack of well-resourced producer organisations can greatly complicate the process of preparing GI submissions, despite the international databases and wider support available.

These factors may explain why establishing national frameworks for GI protection is not always accorded the highest priority, particularly if trademark registration arrangements are already in place. In this context it is not always clear what additional net benefits GI protection will bring

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above and beyond those enjoyed under trademark protection. Illustrative of this is the ongoing discussion in Jamaica on the relative benefits of trademark and GI protection regimes for Blue Mountain coffee, where a GI application is still under consideration.

Fairtrade launches strategy to expand sales to £2 billion

In March 2013, the UK Fairtrade Foundation launched a 3-year strategy to increase sales of Fairtrade-certified goods in the UK to a value of “beyond £2 billion by 2015”. This follows a 19% expansion in 2012, when estimated retail sales reached £1.57 billion, compared to £1.32 billion in 2011. In 2012, retail sales of Fairtrade-certified cocoa grew by 21%, sugar by 35% and bananas by 15%.

For cocoa and sugar, the expansion was largely driven by major chocolate products changing to fair-trade sourcing of raw materials. Sugar sales were also boosted by the decisions of big supermarkets to convert “all their own-label range to Tate & Lyle Fairtrade sugar” and by “Ben and Jerry’s completing the conversion of their full range to Fairtrade”. Product development by Fairtrade companies like Divine Chocolate, Cafédirect, Traidcraft and Equal Exchange supported the expansion of sales. Retailers’ switch to fair-trade sourcing, already apparent in 2012, has continued into 2013.

The CEO of the Fairtrade Foundation maintained that “Fairtrade sales continue to confound expectation in the midst of the current tough economic climate.” In the UK, Fairtrade sales now account for “10% of all tea sold…, just over 27% of all roast and ground retail coffee… and 12% of chocolate confectionery”. In addition, the Foundation reports that over 70% of sales of hot chocolate products are Fairtrade-certified.

However, there are shadows hanging over this positive outlook. In March 2013, the UK supermarket chain Asda announced that it would be selling bananas from the Canary Islands in its stores, as part of its efforts to reduce its carbon footprint. The retailer announced that the reduction in shipping days of more than 80% would bring environmental benefits that it hoped would be attractive to the chain’s customers.

Sources

Fairtrade Foundation, ‘Fairtrade bucks economic trend with 19% sales growth’, 25 February 2013 http://www.fairtrade.org.uk/press_office/press_releases_and_statements/february_2013/fairtrade_bucks_economic_trend.aspx

Fairtrade Foundation, ‘Sales of Fairtrade goods in the UK increase by 19%’, 6 March 2013 http://www.organic-market.info/web/News_in_brief/Fair_Trade/Fairtrade/176/185/0/14156.html

The Guardian, ‘Asda turns to Canary Island bananas to cut carbon footprint’, 11 March 2013 http://www.guardian.co.uk/environment/2013/mar/11/asda-canary-islands-bananas

Comment

As more Fairtrade-certified raw materials are used in value-added consumer products, it is to be expected that the retail sales value of fair-trade products will increase. However, this raises the question of the distribution of the financial benefits of expanding fair-trade sales along the supply chain.

This has a critical bearing on the net benefits obtained by Fairtrade-certified producers from the expansion in the value of retail sales reported in the UK. This is particularly important in an era of rising input costs as it is possible for the net benefits obtained by primary producers of Fairtrade products to decrease, while at the same time the overall value of retail sales of value-added fairtrade products increases.

In part this may account for why in 2012 Fairtrade prices for a number of products were renegotiated and increased. It may also account for the growing attention being paid to

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improving farming efficiency, boosting yields and strengthening the negotiating power of primary producers (see Agritrade article ‘Continued expansion in fair-trade sales despite economic downturn’, 28 April 2013).

Progress in these areas can be seen as important in order to maintain the integrity of the Fairtrade label in the eyes of consumers, who generally assume that by purchasing Fairtrade-labelled products they are placing a higher proportion of the final sale price in the hands of primary producers and their social organisations.

Reinforcing the belief of consumers in the integrity of Fairtrade-labelled products is particularly important, given that some retailers are now beginning to place greater emphasis on other product characteristics (e.g. lowering the carbon footprint of the traded product) rather than production system characteristics that underpin the Fairtrade label.

Food safety

South Africa looking for ‘parallel dispute resolution processes’ in EU citrus dispute

In April, the South African Department of Agriculture (DAFF) issued a statement underlining its concern over EU phytosanitary import measures for fruit affected by Citrus Black Spot (CBS). In the statement, the Department was careful to recognise “the necessity to comply with the relevant import conditions as determined by the EU legislation” and noted that South Africa has consistently taken measures to strengthen its phytosanitary systems in line with EU FVO recommendations. However, it stated that it views the EU measures announced in October 2012 as “more stringent than can be technically justified for protecting the health of potential hosts of the relevant pathogen in EU member states” (for more details, see Agritrade article ‘Tightening of Citrus Black Spot controls could pose challenges’, 28 April 2013).

According to the statement, in October 2012 South Africa received EU notification announcing that “the EU will be imposing a threshold of not more than five interceptions for CBS in one trading season.” This is taken to mean that “after the occurrence of five interceptions in the current export season, the EU will initiate processes to institute stricter measures, which could include a ban on further imports of citrus fruit from South Africa.”

In the light of lack of progress in bilateral discussions with the EC, the South African authorities are considering initiating “other parallel dispute resolution processes”.

Sources

South African Department of Agriculture, Forestry and Fisheries, ‘Phytosanitary import measures of the European Union for fresh citrus fruit in respect of citrus black spot’, 11 April 2013 http://www.info.gov.za/speech/DynamicAction?pageid=461&sid=35668&tid=104280

Comment

The decision of the South African authorities to explore “other parallel dispute resolution processes” is potentially of interest across the ACP. Recent developments in the fruit and vegetable sector have increased ACP concerns over the EU’s application of food safety and sanitary and phytosanitary (SPS) controls that are not considered warranted by the current state of scientific knowledge.

The outcome of any South African initiative is therefore likely to be eagerly awaited.

More broadly, the ACP may need to explore collective mechanisms for dialogue and arbitration over the EU’s application of SPS and food safety standards. The pending dialogue between the EU and the USA on standards applied in the fruit and vegetable sector could take on particular

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significance in this regard and should be closely monitored by ACP fruit and vegetable exporters’ associations (see Agritrade article ‘Standards discussions in EU–US trade negotiations carry global implications’, 4 May 2013). This is particularly the case if mechanisms are to be set in place between the EU and US for science-based arbitration in SPS and food safety disputes.

Commodities: General

How to make the most of agricultural commodities

Following the UNCTAD report on commodities and development which criticised governments that had failed to “make the most of commodities” by overlooking policies to maximise sectoral linkages (see Agritrade article ‘Changes to commodity markets will have lasting price effects’, 18 May 2013), the UN Economic Commission for Africa (ECA) has devoted its 2013 Annual Economic Report to articulating its view of the way forward. This sees a strong role for government and for interventionist policies. The chapter on agricultural commodities, for example, argues that “interventionist state policies are crucial to make the most of soft commodities”. Citing examples from Indonesia, Malaysia and Brazil, it argues that intervention such as “export restrictions [are] important to increase the value-added content of exports”.

The report incorporates evidence from seven sub-Saharan African case studies: Cameroon, Ethiopia, Ghana, Kenya, Nigeria, South Africa and Zambia, with agricultural case studies that include cocoa, coffee, tea and ‘agro-products’ (essentially fresh horticulture).

The report recognises fully the developmental potential of agriculture, arguing for example that “agro-processing is one of the most developed manufacturing sectors in Africa.” While recognising that “there is no ‘one size fits all’ policy approach for commodity-based industrialisation”, in both its policy recommendations and case study analysis the report emphasises the role that governments should play to maximise the developmental impact of commodity production and export. These include several uncontroversial roles, such as creating “inclusive and transparent institutional industrial-policy mechanisms”, “boosting local skills and technological capabilities” and addressing “infrastructure constraints and bottlenecks”. However, some recommendations are more controversial, such as developing “an appropriately directed local content policy” (for which the report argues that WTO “rules provide some legal leeway... and [that] many countries anyway find real-world mechanisms to push through and sustain local content policies”).

The report argues that governments should “adopt strategic interventions to insert indigenous firms in supply chains”. This last recommendation flows from a core element of the research methodology for the report, which has focused on the place of African firms in global value chains (GVCs). It shows, for example by reference to the Kenya horticulture and Ghanaian cocoa industries, how a relationship of trust within a GVC can help African firms upgrade and retain a higher share of the final value of the goods made from their raw materials. However, it notes that this takes considerable time and requires appropriate government support.

The report compares favourably, for example, the experience of Ghana’s cocoa sector with that of Cameroon. It points out that “unlike many other producing countries, Ghana in the 1990s did not dismantle its cocoa marketing body.... [and] while allowing private, registered buyers to control domestic marketing, Ghana retains government control over exports and, critically, over grading and quality assurance.” It attributes the recent growth of the sector and its price premium partly to these features. By contrast, it sees the absence of these features in the “dismal” experience of Cameroon’s efforts to “to promote local processing” and a more beneficial basis for integration into global agricultural value chains.

Sources

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UN Economic Commission for Africa, ‘Making the most of Africa’s commodities: Industrializing for growth, jobs and economic transformation’, Economic Report on Africa, March 2013 http://www.uneca.org/publications/economic-report-africa-2013

Comment

The ECA’s use of the GVC methodology provides a helpful way to identify how best Africa could capitalise on natural resource endowments to avoid “the resource curse” and, instead, use the gains from trade to support sustainable development. The GVC approach focuses on the factors that determine the distribution of the final value of a good between the many elements in the chain “from farm to plate”. Key words are “power relationships”, “trust”, “hierarchies” and “lead firms”. In essence, the approach argues that the return to primary producers is determined by “what they can negotiate” with lead firms in a GVC which, in turn, is heavily influenced by what they can offer. There is much that governments can do to increase their firms’ negotiating power. Potentially some useful lessons could be learnt from the EU’s evolving policy on strengthening the functioning of supply chains.

However, of critical importance is the way that policies are implemented. As the ECA report identifies, there have been examples of successful highly interventionist policies – but there have also been many failures.

The ECA report shows clearly the possibilities and dangers in relation to regional trade. It notes the difficulty that many producers have in breaking productively into GVCs, given the high quality and delivery standards demanded by OECD buyers. It suggests that regional markets could provide a first “learning by doing” experience on the road to global exporting. However, it notes growing extra-regional competition on regional markets. The report also notes the pioneering role of South African supermarkets in local sourcing as they spread across the continent, and expresses the hope that this may encourage European supermarkets (with their own established supply chains) to follow suit and move towards greater local sourcing. Here again government policy could play a role by requiring new retail investors, as an integral part of licensing agreements, to open up dialogues with local producers on product standards and requirements (see Agritrade article ‘Better information on retailer plans sought to boost sector development’, 18 May 2013).

Changes to commodity markets will have lasting price effects

A substantial and broad-ranging analysis of commodity market evolution published by the UNCTAD Secretariat in March has concluded inter alia that there have been ‘structural shifts on both the demand and supply sides of a number of commodity markets which are likely to have a lasting effect on price.’ Further data on the recent performance of commodity markets is provided in the background information provided by UNCTAD for the March 2013 Global Commodities Forum 2103.

Some of the factors identified in the Commodities Report as contributing to structural change are relatively uncontroversial. These include the strong resource-intensive growth in larger developing counties, the drive towards biofuels and “the growing influence of standards in many commodity value chains which”, the report argues, “disadvantage small-scale producers and reinforce the power of leading international firms”. While the existence of some of the other factors identified is quite widely accepted, their relative importance is still controversial. They include what the report calls the “growing asymmetry between more concentrated buyer power and reduced producer power in many agricultural commodities” and changes in corporate strategies.

The conclusion drawn by the report is that, despite the recent booms in world prices, there remains a “commodity problem”, although this differs from earlier accepted definitions. The

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broad purpose of the report is “to reconsider received policies” in the light of what has been learned from “the commodity boom of 2003–2008” and to explain the persistence, despite these high prices, of “many perennial problems faced by commodity producing economies”.

Failures on the part of some commodity-dependent developing countries (CDDCs) are not glossed over. Many have failed to “make the most of commodities” by not adopting policies that would maximise sectoral linkages, possibly because they were over-influenced by the traditional view that the terms of trade with manufactures would deteriorate over time. Critically, the report argues, CDDCs must “improve the competitiveness of their traditional commodity sectors”, as well as support greater diversification and take steps to mitigate short-term shocks.

The report notes that in the past CDDCs in East and South East Asia “reinvested earnings from exports of oil or agricultural products in industrial and infrastructural products” to support economic diversification. More recently, CDDCs used earnings during the commodity boom “to repay their foreign debt, set up sovereign wealth funds... and build their foreign exchange reserves”.

Potential solutions to “the commodities problem” are proposed at several levels. Among the more controversial are those related to the analysis of the contribution that financial markets make to commodity booms. The report argues that there is “a consensus that the excessive influence on commodity markets of trading motivated by financial and not commercial considerations should be curbed”. The report calls for greater involvement of G77 members in international policy making on curtailing financial speculation on commodity markets. At the national and regional levels it calls for poor countries “to put in place some form of food reserve.”

Sources

UNCTAD, ‘Commodities and Development Report’, UNCTAD/SUC/2011/9, March 2013 http://unctad.org/en/PublicationsLibrary/suc2011d9_en.pdf

UNCTAD, ‘Facts and figures on commodities and commodities trade’, 13 March 2013 http://unctad.org/en/pages/InformationNoteDetails.aspx?OriginalVersionID=38&Sitemap_ x0020_Taxonomy=20;#UNCTAD Home&Product_x0020_Taxonomy=1561;#Information Note

Comment

The challenge of channelling commodity revenues into broader economic development is a major one for many ACP states. Some old policy prescriptions remain as valid as they ever were: governments of largely agricultural economies that neglect their rural sectors are undermining their own development efforts; agriculture must be made competitive (and if this can be done by boosting smallholder production, so much the better).

If the functioning of world markets for some commodities has changed, the policy prescriptions required also need to evolve. The extent to which the ructions to world markets of recent years represent structural rather than cyclical change is controversial, and the same applies even more to the relative importance of different structural factors.

The UNCTAD commodities report will not be the last word on the subject – but it is a significant contribution to the debate. The analysis of the alleged financialisation of markets (which sees in recent booms the growing role of investors with no interest in physical goods) is especially controversial. But, while the detailed analysis in the UNCTAD report will not be accepted by everyone, it does – at a minimum – raise the bar for the evidence that must be produced by critics who seek to downplay the extent of financialisation and, hence, the need for related policy initiatives.

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Cereals sector

Constraints on regional cereals trade in West Africa reviewed

The World Bank has published a policy note, in March 2013, reviewing constraints on expanded production and trade in staple food crops in West Africa. The note highlights how most of this trade is small scale and traded informally, based on personal and linguistic ties. While this trade can traverse thousands of miles and cross multiple borders, it often involves only small amounts. For example, Burkina Faso is reported to export 20,000 to 40,000 tonnes of maize a year to Niger and Mali, with lower volumes to other countries depending on seasonal factors. While ECOWAS figures are likely to be an under-estimation, given the nature of informal trade, it is clear that most cereal imports are sourced beyond ECOWAS.

The World Bank maintains that surpluses in high production zones often remain untraded because of high landed costs on deficit markets, with importers finding in easier and cheaper to source from beyond the region. These limited trade connections give rise to huge price differentials for cereals across West Africa (often two to three times higher).

ECOWAS imports of basic cereals by origin (2005–09)

Other ECOWAS

%

Rest of world

%

Maize 3 97

Millet 38 62

Sorghum 21 79

Source: compiled from ‘Regional agricultural transport and trade policy study’, West Africa Trade Hub Technical Report No. 41 (March 2011), cited in World Bank (2013) paper, Table 1, p.2.

While current trading systems are well adapted to local realities, the absence of large-scale trading operations raises the cost of intra-regional supplies. Large-scale purchasers such as the World Food Programme reportedly face major problems in securing the necessary permits and certificates to source regionally, making regional sourcing uncompetitive.

The paper notes that similar problems are faced for trading in crop inputs. Despite an ECOWAS agreement to liberalise trade in inputs under the ECOWAS trade liberalisation scheme (ETLS), national regulations still continue to take precedence over regional agreements. This is the case even when new regulations have been drawn up after the ECOWAS commitments were made. This prevents major cost savings (of up to 50%) from being achieved, and undermines scope for yield improvements.

The World Bank policy note identifies a number of areas for remedial action, including:

strengthening national commitments to intra-regional trade liberalisation at the operational

level, particularly through

a) the abandonment or establishment of greater transparency of seasonal export bans;

b) greater transparency in export and import licence regimes;

c) the dismantling of transit charges;

d) dismantling illicit roadblocks and combatting corruption by border officials;

greater harmonisation of sanitary and phytosanitary (SPS) and food safety standards, and

withdrawal of application of additional non-SPS/food safety standards to trade in cereals;

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improving knowledge and application of statutory requirements for cross-border trade in

cereals;

clarifying and publicising the relevant origin requirements under the ETLS.

The note recognises that, given the fundamental nature of many of these challenges, the focus in the short term may need to be on helping traders to cope better with these constraints. In this context, there is felt to be a need to define “clear outcomes/indicators for each action area… to hold officials and leaders accountable” to commitments made.

Sources

World Bank, ‘Regional trade of food staples and crops inputs in West Africa’, Africa Trade Policy Note No. 36, March 2013 http://siteresources.worldbank.org/INTAFRREGTOPTRADE/PublicationsandReports/23371654/PN36_WA_food_staples_trade_FINAL.pdf

Borderlesswa.com, web page of the Borderless initiative, undated http://www.borderlesswa.com/

Comment

While strategies for sustainable growth in cereals production in West Africa need to get to grips with reducing the costs of farming inputs, enhancing productivity and improving first stage on-farm storage and processing capacities, there is equally a need to reduce the costs of moving large volumes of grain from cereal surplus to cereal deficit areas, if efforts to boost local production are not to be undermined by a localised price collapse.

A large number of studies have identified the multiplicity of causes underlying the high costs of trading cereals across West Africa, and nominal policy commitments have been made to addressing a number of these challenges. However, these commitments are often honoured more in the breach than the observance.

The critical challenge is how to establish mechanisms to ensure the day-to-day application of policy commitments or, as the World Bank policy note puts it, how to help traders to cope better with the constraints faced.

Strengthening private–public sector cooperation along key transportation corridors and at border crossing points could assist. In this regard a rich experience exists in other regions of Africa. Indeed, in West Africa a start has been made under the ‘Borderless’ initiative supported by the USAID West Africa Trade Hub in association with ECOWAS, WAEMU and the World Bank.

Experiences elsewhere in Africa range from the major transport corridor initiatives in Eastern and Southern Africa (e.g. the Maputo corridor programme), through sector-based cooperation between government departments and private-sector-based, trade-focused forensic investigation service companies (e.g. Agri Inspec) in South Africa, to the joint deployment of government and private sector officials at border posts (e.g. the cooperation between the Agronomic Board and Customs Service in Namibia).

In view of the expanding regional demand for cereals, it is implicit in the World Bank analysis that if the West African region’s growing dependence on cereals imports is to be reduced, then the political will has to be mobilised to change existing ingrained practices along entire supply chains.

Strengthening supply chains could boost cereals production in Ethiopia

According to national press reports, an Ethiopian government initiative supported by Italian development cooperation is increasing supplies of durum wheat to local food processing companies in Ethiopia. The ‘Agricultural value chains in Oromia’ project focuses on providing

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high-quality seed, training and technical assistance, as well as warehouse construction and supporting the marketing of locally produced wheat by fostering better contacts between farmers’ cooperatives and processing companies.

The project has established “innovative grain supply contracts between the cooperative union and the local food processing industry”. The “reference price was the prevailing average market price for bread wheat at harvest time in the zone”, but with a premium price being paid for “every increment of protein content over a minimum fixed standard”. The most protein-rich batches of durum wheat received prices “30% higher than bread wheat”, with transport costs being paid by the processing industry for loaded trucks of 40 tonnes.

In the first year of operation, the project achieved yields approximately one-third above the national average wheat yield (2.4 tonnes/ha, compared to a national average of 1.8 tonnes ). Contract farming of seed supplies is now being developed to further consolidate the work of the project.

Sales of wheat increased from 750 tonnes to 2,000 tonnes in 2011/12. Durum wheat was sold to two companies, Dire Dawa Food Complex (1,230 tonnes) and Kaliti Food SC (770 tonnes), whose annual consumption of wheat is 600,000 tonnes and 200,000 tonnes respectively. In the fiscal year 2012, “Ethiopia imported 472,147 tonnes of durum wheat, at a cost of 174.6 million dollars.” In the project area, efforts are under way to triple production next season to 6,000 tonnes. While a long tradition of durum wheat production exists in Ethiopia, processing companies such as Dire Dawa still depend on imports for three-quarters of their wheat supplies, for the production of biscuits, bread, pasta and macaroni. Consumer demand for all forms of spaghetti and macaroni is reportedly “growing faster than for any other food item, so ever-increasing amounts of durum wheat grain are required”. However, local production is limited and is often of poor quality, reinforcing the current import dependency.

According to private sector sources, hard currency constraints on wheat imports are resulting in a surge in imports of packed pasta. According to the Indexmundi commodities website, in 2012 Ethiopia produced an estimated 3.1 million tonnes of wheat – an almost threefold increase since 2002 (1,072,000 tonnes).

Sources

Addis Fortune, ‘Oromia farmers sell 2,000tn of pasta wheat to local factories’, 3 March 2013 http://addisfortune.net/articles/oromia-farmers-sell-2000tn-of-pasta-wheat-to-local-factories/

Indexmundi.com, ‘Ethiopia wheat production by year’, undated http://www.indexmundi.com/agriculture/?country=et&commodity=wheat&graph=production

T. Chiari et al., ‘Durum wheat value chain development in the Bale Zone, Oromia Region, Ethiopia’, 1 November 2012 http://www.slideshare.net/CIMMYT/ethiopia-tiberio-chiaridurumwheatvaluechaindevelopment

Comment

The establishment of standardised contracts, against a background of efforts to strengthen the organisation of cooperatives and their negotiating power, potentially offers considerable scope for growth of durum wheat production in Ethiopia. However, the cooperative model of organisation has had a history of mixed success in Eastern Africa, potentially offering lessons for Ethiopian farmers.

Elsewhere in East Africa, cooperatives initially worked well in pooling farmers’ resources and produce, and helping farmers to overcome diseconomies of scale. Great success has been achieved by tea and coffee cooperatives. However, cotton cooperatives have largely failed due to poor management and excessive government interference, which led to delays in payments to farmers.

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Dairy sector cooperatives in Kenya have also faced problems in the past. However, liberalisation is now seeing a revival of dairy sector cooperatives, and these are increasingly becoming involved in value-added processing.

This diverse experience suggests that for cooperatives to thrive, a conducive policy environment is required that limits state intervention in the operation of cooperatives where strong leadership and good managerial skills exist. Strengthening the ability of producer cooperatives to track the functioning of supply chains is also important. While better linking of producers to processors can bring benefits, the experience of Kenyan tea cooperatives suggests that the greatest benefits lie in empowering cooperatives to move up the value chain and reduce their dependence on commodity-based sales. However, it needs to be recognised that more substantive investment and management challenges can be faced in other sectors, such as the durum wheat sector, which means that the option of moving up the value chain to reduce dependence on commodity-based sales is only available in the longer term.

Temporary export bans and GMO policies complicate Zimbabwe maize procurement

In February 2013 complaints emerged in Zimbabwe over purchases of 17,000 tonnes of maize from Zambia by Zimbabwean grain millers which had been blocked following the introduction of a de facto export ban. The Chairman of the Grain Miller’s Association of Zimbabwe (GMAZ) said “Zambia’s Food Reserve Agency (FRA) refused to release the grain although all due payments had been made”. This followed rising maize prices in Zambia, attributed by some analysts to the purchasing policy of the Zambian Food Reserve Agency, which was reportedly “buying huge quantities of maize at high prices from farmers, then selling the maize to millers at deeply subsidised rates”. However, about 25% of FRA-held stocks were reportedly not fit for human consumption. These policy moves, according to press reports, led to price hikes by traders and millers, with this in turn leading the Zambian government to place tighter controls on exports for fear that the large-scale export of Zambia’s surplus would further fuel domestic grain price inflation.

However the Zimbabwean Minister of Industry and Commerce said he expected the issue to be resolved shortly through government-to-government negotiations. On 6 March 2013 Reuters reported the Zambian government had “lifted its restriction on maize exports due to inadequate storage capacity” so as to “create space for the new harvest. “Agriculture Minister Robert Sichinga said in parliament Zambia would export 200,000 tonnes of its 916,934 tonnes of maize”. The lifting of the export ban was confirmed by the acting Zambian President in April 2013, who maintained “the down-sides of having it in place are many”, in particular increased smuggling.

In April 2013 it was reported Zambia would allow the export of 150,000 tonnes of grain to Zimbabwe “on condition that the deal will be on a government-to-government basis”. Press reports in April 2013 indicated private millers in Zimbabwe had turned to South Africa for imports of 20,000 tonnes of maize.

In March 2013 IRIN reported the maize shortage in Zimbabwe was increasing pressure for a review of the government’s GM-free policy, given the ready availability of GM maize in South Africa. Blog postings in April suggested orders placed for maize supplies from South Africa could include GM maize, a product which normally requires prior government approval.

Sources

The Zimbabwe Mail, ‘Zambia bans maize exports to Zimbabwe’, 18 February 2013 http://www.thezimbabwemail.com/zimbabwe/15934-zambia-bans-maize-exports-to-zimbabwe.html

Bulawayo24.com, ‘Zimbabwe to import maize from Zambia’, 7 April 2013 http://bulawayo24.com/index-id-news-sc-national-byo-28601.html

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Pan-African News, ‘Zambia to import maize for Zimbabwe’, 14 April 2013 http://panafricannews.blogspot.be/2013/04/zambia-to-import-maize-for-zimbabwe.html

Activistpost.com, ‘South African GM maize contaminates the world’, 15 April 2013 http://www.activistpost.com/2013/04/south-african-gm-maize-contaminates.html

IRIN, ‘Maize shortage renews debate over GM in Zimbabwe’, 4 March 2013 http://www.irinnews.org/Report/97588/Maize-shortage-renews-debate-over-GM-in-Zimbabwe

Reuters, ‘Zambia lifts restriction on maize exports’, 6 March 2013 http://news.yahoo.com/zambia-lifts-restriction-maize-exports-142331412--finance.html

Zambia Daily Mail, ‘Maize export ban reversed’, 9 April 2013 http://www.daily-mail.co.zm/?p=3609

Comment

The on–off nature of maize export restrictions introduced by the Zambia government and the current government-to-government agreement between Zambia and Zimbabwe would appear to be undermining the development of private sector maize trading networks between the two countries.

The periodic implementation of export bans, despite SADC’s and COMESA’s commitment to the elimination of non-tariff barriers to trade, suggests a need to strengthen mechanisms to ensure that existing regional trade policy commitments are fulfilled.

Export bans provide poor solutions to price stabilisation challenges, since they discourage production. Longer-term solutions are required, including improving market information systems to facilitate national and intra-regional trade so that regional price disparities are closed.

The use of export bans, however, also highlights the tension that arises from the implementation of national input subsidy and marketing programmes designed to enhance national food security, and regional agricultural trade liberalisation commitments. Put simply, the narrow national political question is often posed of why national taxpayers should finance regional food supplies.

Recent developments in the maize trade between Zambia and Zimbabwe and between South Africa and Zimbabwe would also appear to raise the issue of regional policy harmonisation on genetically modified organisms (GMOs), an issue of growing significance given that GM seed now produces 72% of South African maize (see Agritrade article ‘South Africa’s export profile complicates regional food security situation in Eastern and Southern Africa’, 2 December 2012).

Impact of reforms on the EU cereals sector

The EC has published an evaluation of the impact since 2003 of CAP reform measures in the cereals sector (cereals, oil crops and protein crops). The analysis acknowledges the complexities faced in determining policy impacts and the growing influence of other EU policies on the cereals sector (e.g. biofuel policy).

The evaluation describes the cereals sector policy measures both pre- and post-reform. It concludes that CAP reforms have “radically altered” patterns of cereals sector support. Post-reform, the main support measure is the single decoupled farm payment, and intervention buying is now solely a safety-net measure and no longer supports EU market prices. The evaluation notes that, in the face of increased price volatility, processors, traders and producers are “using price risk management instruments more”.

Since 2003, the area under cereals has fallen by 4%, and the area under protein crops by 25%, while the area under oil crops has increased by 25%, largely in response to EU biofuel policy developments. In this period there was also a significant “expansion in German silage maize output for biogas” (now 11% of the entire German utilised agricultural area) and an unexpected

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“increase in the use of zero grazing in dairy farming”. Overall, the report finds that reforms have “promoted the EU’s comparative advantage in common wheat output”.

Despite the fall in the area under cereals, yield improvements mean that the EU’s “level of self-sufficiency [for cereals] as a whole increased from 104.3% to 106.8%”, with durum wheat “the only cereal with a consistent supply deficit”.

The analysis maintains that reforms have resulted in “a clear cost reduction” to the EU budget, although “the nominal value of coupled plus decoupled aids per hectare barely changed from pre- to post- reform years.” However, higher world market prices led to higher producer incomes over the period 2007–10 for most cereal farmers, compared to 2000–03. The report maintains that EU patterns of cereals production now respond less to EU support measures and more to international price signals.

Nevertheless, it is noted that, despite relatively high global commodity prices, “there are still member states in which [cereals, oilseed and protein] producers, on average, would have earned very low incomes if coupled and decoupled aids had not been provided.”

Post-reform, the EU cereals trade regime consists of “a variable import duty system and tariff-rate quotas (TRQs) designed to protect the internal market from lower-priced world market imports”. Export refunds have not been used in the cereals sector since 2006, but the right to deploy such policy tools is retained in case market circumstances should require their use.

The analysis notes that “the decision not to offer export refunds helped to overcome the constraints on subsidised exports under the WTO, and this generated a rise in the share of EU net exports in total world cereals exports between 2000-03 and 2007-10.” Indeed, “the EU share in total world exports of wheat and flour rose from 5.2% to 7.7% from pre- to post-reform.” Significantly, “the EU maintained or raised its share of imports in most traditional regional export markets that are relatively close to the EU... mainly in North and Sub-Saharan Africa and the Near East.”

Sources

LMC International (for EC DG Agriculture), ‘Evaluation of measures applied under the Common Agricultural Policy to the cereals sector, Executive Summary, December 2012’, 12 March 2013 http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/2012/cereals-2012/exec_sum_en.pdf

LMC International (for EC DG Agriculture), ‘Evaluation of measures applied under the Common Agricultural Policy to the cereals sector, Final Report, December 2012’, 12 March 2013 http://ec.europa.eu/agriculture/evaluation/market-and-income-reports/2012/cereals-2012/fulltext_en.pdf

Comment

The analysis in the evaluation prepared for the EC implies that coupled payments help to sustain EU cereals production at higher levels than would be the case without this support. This is assisted by the highly protective tariff regime maintained in the cereals sector.

The EU maintains variable import duties for six clearly defined categories of cereals, with the duty set at “the difference between 155% of the EU intervention price and a representative import (c.i.f.) price at the port of Rotterdam”. The EU also has in place TRQs for:

medium quality wheat;

malting barley;

maize;

cassava;

durum and high-quality wheat.

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There is also an inward processing relief scheme for use in products to be exported. These tools are explicitly intended to protect EU markets from lower-priced world market imports.

A number of observations arise that are of relevance to the use of similar policy tools in ACP countries:

ACP governments would appear to be constrained in using a system of variable levies to protect domestic markets by the ‘standstill’ provisions included in many interim EPAs. Similarly, ACP governments would be constrained by current interim EPA provisions on quantitative restrictions from using similar TRQs to manage agricultural markets, as is the practice in the EU cereals sector.

The findings need to be seen in the context of the EU’s growing role in the global cereals trade, including flour exports, and the EU’s export focus on Sub-Saharan African markets. The analysis in the evaluation implicitly raises issues of the cross-subsidisation of EU cereals sector exports, as a result of the import management tools applied by the EU and the systems of farm support in place.

Cotton sector

Decline in cotton stocks could support prices

In March 2013, the International Cotton Advisory Committee (ICAC) projected a decline in global cotton inventories for next season, based on a reported slowdown in stockbuilding by China. However, by April 2013 the ICAC had reversed this prognosis, reducing its forecast of a decline in world cotton stocks of 1.2 million tonnes over 2013–14 to a decline of 250,000 tonnes, following an upward revision in the production figure to 23.5 million tonnes. This represented a decline in production of only 9.8%, rather than the 14% initially projected. This is still significantly more than the 2.9% decline projected by the USDA.

According to reports carried on Agrimoney.com, “a jump of some 20% in New York cotton prices so far is viewed as prompting many farmers to reconsider plans for a huge scaleback in plantings of the fibre, notably in the US itself, the top exporter.” Nevertheless, “the ICAC, in its first forecast for cotton prices in 2013-14, forecast them averaging 118.0 cents per pound over the season.” This is higher than Rabobank’s forecasts in March of a rise in cotton prices from 80 US c/lb to 85 c/lb by the fourth quarter of 2013, but in line with the rising trend. This would “represent a 31% jump from the 90.0 cents per pound expected for [the 2012-13] season” and would be “the highest [forecast value] since the 164 cents a pound averaged in 2010-11, the season in which both the Cotlook A and futures set records above 200 cents per pound”.

These ICAC forecasts are based on “projections for cotton stocks held outside China”.

Sources

Agrimoney.com, ‘ICAC hardens idea of drop in world cotton stocks’, 4 March 2013 http://www.agrimoney.com/news/icac-hardens-idea-of-drop-in-world-cotton-stocks--5583.html

Agrimoney.com, ‘Rabobank warns cotton price bull, and cocoa bears’, 8 March 2013 http://www.agrimoney.com/news/rabobank-warns-cotton-price-bulls-and-cocoa-bears--5601.html

Agrimoney.com, ‘ICAC upbeat on cotton price, despite stocks uplift’, 2 April 2013 http://www.agrimoney.com/news/icac-upbeat-on-cotton-price-despite-stocks-uplift--5683.html

Comment

The rise in world cotton prices in the first quarter of 2013 and an improvement in returns relative to soybeans have certainly led American producers to plant more cotton. At the end of March, USDA was forecasting a planted area of 10 million hectares in 2013/14, nonetheless a 19 %

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decrease over 2012/13. These figures could yet be revised upwards. As far as output is concerned, ICAC forecasts a rise of 300,000 tonnes to a total of 3.7 million tonnes. Closing stocks in 2013/14 are consequently expected to lie close to the very high levels of 2012/13. This is a result of Chinese policy. To build up its stocks, China has been buying cotton from its domestic growers at above-market rates, and on the international market, but this has also served to diminish supply and drive up prices. Investment activity, too, has accentuated these price increases. Without China's intervention, market fundamentals suggest that prices should range between 60 and 70 US c/lb. The high prices have benefited African nations, the majority of whom export almost all of their output as raw cotton. Some of the largest producers, like Burkina Faso and Mali, have announced higher production targets, even though sowing time is still several months away, and total output for 2012/13 showed a substantial increase. Farm-gate prices have been revised slightly downwards for 2013/14. However, they remain high, showing a decrease of only 5 FCFA/kg.

Cocoa sector

Jamaican cocoa farmers’ incomes boosted by pragmatic solutions while legislation is pending

According to the Jamaican press, the president of the Jamaican Cocoa Farmers’ Association (JCFA) has said that “the JCFA has been paying its members up to J$2,500 [€19.68] per box for their supplies, which is J$500 more than the J$2,000 price paid by the Cocoa Board”. However, “JCFA bought only 87.5 tonnes of cocoa” in the 2012/13 financial year, around 7% of production. Given the financial difficulties of the state-run Cocoa Industry Board – which has seen farmers holding back supplies as a result of arrears in payment – JCFA has had to announce that it can only buy cocoa from JFCA members. At present, payments to JCFA members are made in a timely manner, through a well- structured payment system (paid within 2 weeks direct to their bank accounts). JCFA is, however, open to accepting new members upon payment of membership fees.

JCFA sees readily available opportunities for the marketing of Jamaican fine/flavoured cocoa in Belgium, Germany, Japan and Saudi Arabia, noting that the only limit is the availability of supplies. For the coming year the Association has already committed its available production under specific contracts, obtaining prices that are reportedly among the highest in the Caribbean region. It is these forward contracts that support the JCFA’s ability to promptly pay farmers at levels 25% above the Cocoa Industry Board price.

JCFA is working with the Cocoa Industry Board to boost overall cocoa production by purchasing and distributing “24,000 seedlings… to all cocoa farmers, regardless [of whether] they are members of the association”. However, farmers must undertake “all land preparation work before receiving the seedlings”.

Plans are currently under way in Jamaica to “demonopolise” the sale of cocoa beans. While the new legal arrangements for licensing cocoa beans exports have not yet been finalised, the JCFA has been able to commence direct exports with the permission of the Ministry of Agriculture.

Sources

Jamaica Gleaner, ‘JCFA limits cocoa purchase to members’, 3 April 2013 http://jamaica-gleaner.com/gleaner/20130403/business/business5.html

Comment

Shifting from a state-controlled marketing and export system to producer-run or private-sector-based marketing systems is by no means a simple task. In the case of Jamaica, a pragmatic approach to this process of reform appears to have been adopted, with the JCFA being allowed

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to gradually build up experience alongside the Cocoa Industry Board. This can be seen as a positive step. JCFA appears to be pushing the frontiers of new, dynamic markets and crafting new and qualitatively different marketing arrangements, to the benefit of its membership. By so doing, the JCFA has been able to overcome one of the most significant hazards for cocoa farmers – price and market uncertainty. JCFA also appears to be achieving some success in mitigating risk on the input side, which should reduce problems of output volatility.

The price benefits of transitioning to private sector organisational forms such as the JCFA are clearly in evidence, but of even greater significance is the shift towards more market-determined/market-oriented engagements with the rest of the world that is taking place within the marketing board. Producers may then benefit from having two organisations involved in marketing cocoa, perhaps developing expertise in serving different market components.

Given the gradual moves at the WTO to develop disciplines on the activities of state marketing boards, undertaking this transition now towards producer-run marketing could prove invaluable in the long term.

Dairy sector

Review highlights role of agri-cooperatives in strengthening farmers’ position in supply chains and reducing price volatility

The EC has published a report that brings together and reviews 77 reports on support for EU farmers’ cooperatives, drawn from 27 country reports, six EU-wide synthesis reports, 34 case studies, and 2 studies on cluster analysis and the development of agricultural cooperatives. According to the report, agri-cooperatives “play a key role in strengthening bargaining power” of producers and help farmers “to capture a higher share of the value added in the food supply chain in all member states”. This is in part because “a large number of cooperatives have expanded their activities in downstream stages of the food chain.” However, the report notes that there are limits to the countervailing power that this generates vis-à-vis large retailers.

The analysis found that a large market share for cooperatives can increase producer prices and reduce price volatility. This is seen as particularly important in an era of heightened price volatility. These benefits arose even for non-cooperative members, with the activities of the cooperative generally compelling competitors to pay higher prices. This role was particularly well developed in the dairy sector, with cooperatives across the 27 EU member states accounting for well over 50% of dairy product sales; product branding by cooperatives is more strongly developed in the dairy and wine sectors than in other sectors.

The analysis identified 46 transnational cooperatives, mainly in the dairy and fruit and vegetable sectors. These transnational cooperatives “often have foreign subsidiaries that source from non-member suppliers”. According to the report, “most cooperatives prefer to internationalise by acquiring or setting up foreign investor-owned firms, and not by merging with other cooperatives or inviting foreign farmers to become members.”

The European farmers’ and agri-cooperatives’ organisation Copa-Cogeca, commenting on the EC report, has endorsed “the proposal to extend product coverage for recognition of producer organisations, like cooperatives” under the current CAP review, and called for an expansion of funding for producers’ organisations to be prioritised under the EU rural development policy.

This call needs to be seen against the background of the EC proposal to cut EU direct aid payments by 4.98% in 2013, as part of the wider EU financial discipline mechanism. Copa-Cogeca was highly critical of the proposal, noting in a press release that the production costs of many EU farmers are barely covered by market prices.

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Sources

EC, ‘Support for farmers’ cooperatives’, Executive Summary, November 2012 http://ec.europa.eu/agriculture/external-studies/2012/support-farmers-coop/exec_sum_en.pdf

EC, ‘Support for farmers’ cooperatives’, Final Report, November 2012 http://ec.europa.eu/agriculture/external-studies/2012/support-farmers-coop/fulltext_en.pdf

Copa-Cogeca, ‘Copa Cogeca urges EU institutions to include findings of new EU Commission report, which confirms benefits of cooperatives for farmers in future CAP’, 27 March 2013 http://www.copa-cogeca.be/Main.aspx?page=Archive

Copa-Cogeca, ‘Copa-Cogeca attacks plans to cut EU farmers’ payments by further 5% in 2013, 28 March 2013 http://www.copa-cogeca.be/Main.aspx?page=Archive

Comment

Two of Europe’s leading dairy cooperatives (Arla and FrieslandCampina) are looking to invest in the dairy sector in Africa. Given the benefits to milk producers that arise from cooperative forms of organisation, the question arises: to what extent can this interest by European dairy cooperatives be capitalised on by developing stronger producer organisations in those African dairy sectors where they are looking to invest?

Currently milk production in East Africa is largely by smallholders, with milk being primarily marketed through informal channels. While such milk is cheap and is seen as more wholesome, governments are increasingly concerned over the safety of such directly consumed milk. Efforts are being made to raise milk quality standards and improve enforcement, with malpractice, such as adulteration, generally decreasing.

While formal sector milk marketing is largely controlled by private sector dairies, liberalisation of the dairy sector in Kenya has seen the rise of producer cooperatives that have themselves entered milk processing. This mirrors developments in the Kenyan tea sector.

Against this background, scope exists for mutually beneficial cooperation between local and European dairy cooperatives focused on technology transfer and the mobilisation of investment capital. Such cooperation, possibly through the vehicle of joint ventures, could play a major role in expanding the participation of smallholder producers in the dairy sector in East Africa.

In West Africa, where local milk production falls far short of rapidly expanding demand for dairy products, more fundamental challenges are faced: these include the modernisation of milk production, collection and processing required to achieve competitive dairy production based on locally sourced milk.

The long-term engagement of EU-based cooperative dairies, within the framework of government policies designed to progressively improve and expand domestic milk production, could potentially offer a way forward, given the strong growth in consumer demand that is under way (see Agritrade article ‘Expanding Dutch corporate involvement in local milk procurement in Nigeria’, 15 April 2013).

This, however, will require an intensification of private–public sector dialogue on the appropriate policy framework required at national and regional level, in order to attain the objective of increasing domestic milk supplies to an expanding dairy processing sector.

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Horticulture sector

Senegal refines its onion import regime

According to articles in the regional press, strong growth since 2003 in the Senegalese onion sector has seen production rise from 40,000 to 240,000 tonnes. However, Senegal continues to be an important market for EU onion exports. Senegal’s imports from the EU increased by 58% between 2007 and 2011, before falling in 2012 by 8.4% to 133,328 tonnes, some 17.2% of the EU’s total onion exports of 773,265 tonnes.

The decrease in Senegal’s imports from the EU may in part be attributable to the effects of a seasonal import ban that has been in place for a number of years. However, questions have been raised over the effectiveness of the seasonal import restrictions, with reports of stockpiling of imported onions occurring prior to the implementation of seasonal restrictions and their gradual release through the closed import period. Press reports in April 2013 highlighted the difficulties faced by Senegalese onion producers in obtaining profitable prices for their onions.

In order to address this issue, the 2013 starting date for seasonal import restrictions was brought forward from April to February. In addition, the government decided in April to introduce more stringent measures at ports to prevent the import of containers containing onions, as well as announcing that it would “facilitate” the granting of import authorisations to “importers who commit to promoting the marketing of local production”.

Linked to these import measures, the government of Senegal is supporting investment in post-harvest infrastructure, with the building of a major storage and conservation warehouse in Dagana Region, with support from the EU. This will allow producers to store their production and sell it during low season (i.e. periods when onions are not being harvested).

Sources

Agence de Presse Sénégalaise, ‘Senegal : Gel des importations d’oignons du 10 février au 31 août’, 5 February 2013 http://fr.allafrica.com/stories/201302051044.html

Jeunemanager.org, ‘Le monde rural s’effondre : Les importateurs d’oignons flouent l’Etat’, 2 April 2013 http://jeunemanager.org/le-monde-rural-seffondre-les-importateurs-doigno1ns-flouent-letat/

Senegalese Ministry of Trade, Industry and the Informal Sector, ‘Oignon, le Ministre Alioune SARR decide le blocage de l’oignon importé au port’, 10 April 2013 http://www.commerce.gouv.sn/article.php3?id_article=233#sthash.2JnX56zu.C0UZL4Uj.dpuf

Le Soleil, ‘Conservation des produits agricoles - Bokhol va disposer d'un magasin de stokage d'oignon d'une capacité de 100 tonnes, 22 January 2012 http://fr.allafrica.com/stories/201301221331.html

Le Soleil, ‘Commercialisation - Les producteurs d'oignon des Niayes expriment leur désarroi’, 10 April 2013 http://fr.allafrica.com/stories/201304100971.html

EU, Export Helpdesk, trade statistics for EU27 onion exports to Senegal in 2012 http://exporthelp.europa.eu/thdapp/comext/ComextServlet?action=output&viewName=eur_partners&simDate=20120101&languageId=fr&ahscode1=070310&cb_reporters=EUR27&cb_partners=0248&list_years=2012&measureList=eq

EU Export Helpdesk, trade statistics for EU27 total onion exports in 2012 http://exporthelp.europa.eu/thdapp/comext/ComextServlet?action=output&viewName=eur_partners&simDate=20120101&languageId=fr&list_years=2012&measureList=eq&cb_reporters=EUR27&cb_partners=1011&ahscode1=070310

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Comment

In June 2012, the Senegalese inter-professional organisation of the onion industry called for a complete ban on onion imports for 3 years (see Agritrade article ‘Debate on onion tariffs in Senegal intensifies amid onion glut on West African markets’, 6 August 2012). The government has, however, opted for a more sophisticated import control policy.

The linking of import licence allocations to the promotion of local production appears to parallel the successful use of import licensing arrangements in Namibia. In the Namibian horticulture sector, this forms part of a wider scheme, which includes a restricted-access market information database for producers, retailers and traders. By 2011, this scheme had seen the share of locally produced Namibian fruit and vegetables increase to 37.5% of national commercial consumption from a mere 7% when the scheme was launched in 2004.

The critical challenge in Senegal will hinge upon effective implementation of the new import regime and the development of broader initiatives to strengthen domestic onion supply chains. Strengthening domestic supply chains will require the enhancement of dialogue between producers, traders and retailers, which in turn will require a strengthening of producers’ organisations. It will also require targeted investments in overcoming bottlenecks in the supply chain. Current investments in storage facilities need to be seen in this context. Strengthening domestic onion supply chains is essential if shortfalls in national production and marketing of quality onions are not to undermine the more sophisticated application of trade policy instruments.

Given the scope for cross-border smuggling, large increases in EU onion exports to neighbouring countries pose challenges not only to Senegalese onion exports, but also to onion producers in Niger (see Agritrade article ‘Dutch onion exports to West Africa show continued growth’, 2 February 2013). The neighbouring coastal markets of Côte d'Ivoire, Ghana, Benin and Togo account for 70% of Niger’s onion production, and increasing EU onion exports to non-Senegalese West African markets could disrupt this trade.

This suggest a need for a concerted regional policy response to challenges posed by rising EU onion exports (see Agritrade article ‘Debate on onion tariffs in Senegal intensifies amid onion glut on West African markets’, 6 August 2012).

Kenya–Tanzania SPS dispute on flowers in transit resolved

In April 2013, it was announced that Kenya had lifted its ban introduced in May 2011 on Tanzanian cut-flower exports via Jomo Kenyatta International Airport. This followed multiple rounds of negotiations and confirmation that effective measures were being taken to combat the 11 pests identified in the Pest Risk Analysis that was completed in September 2012.

However, according to the Tanzania Horticulture Association, the ban has resulted in Tanzanian flower farmers losing “more than five” key customers of cut roses in the UK, Australia, Japan, Russia and Italy.

A report in the Kenyan Star newspaper in April noted that “flower growers in Kenya are seeking to consolidate new markets in Asia and the US as airlines begin direct flights to these destinations” (airfreight costs can account for up to 50% of the import price). These markets “now account for up to 10 per cent of total flower exports annually” from Kenya. According to Kenya’s Horticultural Crops Development Agency, “Japan, South Korea, Russia and the US are among the new buyers taking up more of the Kenyan produce.” Market opportunities have also been identified in Ghana, the DRC and Nigeria.

The report notes that in the first 2 months of 2013, Kenyan cut-flower production increased by 8%. Kenya accounts for one-third of international flower produce.

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Sources

East African Business Week, ‘Kenya lifts Tanzania flower ban’, 15 April 2013 http://allafrica.com/stories/201304160118.html

The Star, ‘Kenya eyes new flower markets to boost sales’, 12 April 2013 http://allafrica.com/stories/201304121201.html

Comment

In the past, resolving sanitary and phytosanitary (SPS) disputes among EAC members has not always been given priority by hard-pressed national institutions, particularly when there is no domestic constituency pushing for an early resolution in the country imposing the restrictions. This reality can give rise to tit for tat measures aimed at ensuring a reordering of national institutional priorities.

These disputes illustrate the need for commonly agreed regional rules for resolution of SPS disputes, with specified time frames for responding and acting at each stage in the process. The rules also need to be backed up by an independent compliance monitoring mechanism.

However, it is important when dealing with SPS issues to recognise the different technical and human resource capacities that exist in different EAC countries. This could advantageously be backed up by a programme of capacity-building measures to enhance mutual confidence in neighbouring states’ SPS control capabilities.

Such measures are of growing importance, given the increasingly dynamic nature of global trade relationships and the increasingly common practice of multiple retailers of maintaining diverse sources of supply in order to ensure that consumer demand is constantly met. This practice tends to mean that even relatively short disruptions can lead to contracts being lost as replacement suppliers are identified. In this context, if new suppliers that stepped in to cover the shortfall in Tanzanian supplies happened to be Kenyan, this should come as no particular surprise, since this would be consistent with retailers’ multi-sourcing strategies.

Trends in the global citrus trade

Data compiled by Freshfel and Shappe reported on the website Fresh Fruit Portal suggest that total southern hemisphere citrus production is projected to increase by 9.85% in 2013, with strong production growth in Peru (+10%) and Australia (10.68%). Total citrus exports for the region are projected to increase by 2.8% in 2013 to 2,587,935 tonnes, up from 2,517,071 tonnes in 2012.

Citrus exports from Peru are projected to increase by 10% to 92,004 tonnes, from Argentina by 6.31% to 433,000 tonnes, and from Australia by 2.16% to 176,500 tonnes.

Production in Chile, by contrast, is expected to fall by 3.62% and exports by 1.75% as a result of water scarcity. Uruguay, similarly, is expected to see a 17.5% decline in exports to 119,775 tonnes, following a decline in production of between 15 and 20%.

South Africa continues to dominate the global citrus export trade, with an increase of 4% projected for 2013, taking total South African citrus exports to 1,602,304 tonnes, some 61.9% of southern hemisphere exports. South African exports have been affected by increased input costs for shipping, transport, energy and labour, although a weakening rand has eased the impact of increases in domestic costs.

Other articles on Fresh Fruit Portal report that a number of market uncertainties overhang the South African citrus sector. These include:

“the pending threat of a ‘five strikes and you’re out’ scenario for South African citrus in the

EU”, linked to detections of Citrus Black Spot (CBS) during import inspections;

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the introduction of Chinese import restrictions on Californian citrus, which is likely to intensify

competition on the US market from domestic US producers in the high-end component

served by South African exporters;

the emergence of China as “the world’s number one citrus producer” and “sixth largest”

citrus exporter overall.

The reports note that South African citrus exporters are increasingly interested in the Russian market, but face competition from existing suppliers Ecuador, China, Argentina and Chile. Far Eastern and Middle Eastern markets are also of growing interest.

Sources

Freshfruitportal.com, ‘Export outlook up for southern hemisphere citrus’, 26 April 2013 http://www.freshfruitportal.com/2013/04/26/export-outlook-up-for-southern-hemsiphere-citrus/

Freshfruitportal.com, ‘Markets remain uncertain for South African citrus exports’, 24 April 2013 http://www.freshfruitportal.com/2013/04/24/markets-remain-uncertain-for-south-african-citrus-exports/

Freshfruitportal.com, ‘South African citrus feels uncertainty from China, EU’, 6 May 2013 http://www.freshfruitportal.com/2013/05/06/south-african-citrus-feels-uncertainty-from-china-e-u/

Comment

While the granting of improved access to the EU market for Peruvian citrus exports may well be encouraging citrus exports to the EU, South Africa’s dominant position as a citrus exporter, linked to its dynamic marketing system, means that there is likely to be little immediate threat from increased competition from Peru (either in terms of volume or price, given the different market components served).

Of much greater concern is the potential threat from the new EU ‘five strikes’ rule for CBS detections whereby the EU would only allow a maximum of five CBS import interceptions in a season (see Agritrade articles ‘Tightening of Citrus Black Spot controls could pose challenges’, 28 April 2013, and ‘South Africa looking for “parallel dispute resolution process” in EU CBS dispute’, forthcoming 2013). Already there have been reports that EU citrus traders are moving away from southern hemisphere suppliers, with some traders even reportedly moving into trading alternative products that carry lower risk of interception. This would appear to heighten the importance of market diversification for South African exporters.

Increased competition from domestic suppliers on the US market, linked to Chinese import restrictions on Californian citrus exports, is a matter of short-term concern, while in the longer term growth in Chinese citrus exports could pose a competitive challenge on the Far Eastern markets that are currently being targeted by South African citrus exporters.

Overall, however, given the marketing infrastructure in place, South Africa is likely to be better placed to respond to these challenges than citrus exporters in neighbouring Swaziland and Zimbabwe, where eventually producers may simply decide to exit the overseas export trade.

Poultry sector

Better information sought on retailer plans to boost sector development

The CEO of the Barbados Agricultural Society has called for new entrant restaurant franchise operators, such as Burger King and Subway, to provide more advanced notice to local poultry producers of their investment plans and product requirements.

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Advanced notice would then enable local producers to invest in technological upgrades to meet the product requirements of such fast food chains, rather than dependence being built up on imported products. This would ensure that the local agricultural sector is able to benefit from the expanded demand that such retail-level investments create, rather than it giving rise to a further contraction, as products to meet the new demand are externally sourced.

Currently, many of the poultry products required by these franchise operators are not available from local producers.

Sources

Barbados Advocate, ‘Imports a threat to local poultry industry?’, 24 March 2013 http://www.barbadosadvocate.com/newsitem.asp?more=business&NewsID=29775

Comment

The underlying issue raised by the CEO of the Barbados Agricultural Society in relation to poultry sector development in Barbados is of far wider concern than simply the relations of the local poultry sectors with fast food chains. It is also applicable to plans by multiple retailers to open new chains across the ACP, particularly in Africa.

South African, European and Kenyan multiple retailers all have plans to expand their operations across various African regions. These retail chains bring with them pre-existing product standards and procurement practices that can see local food and agricultural producers locked out of a growing market component.

This raises important policy challenges for ACP governments in terms of ensuring that new investors are required, as an integral part of licensing agreements, to open up dialogues with local producers on product standards and requirements, in order to give local suppliers an opportunity to upgrade their production to meet these new market demands.

There is evidence of such dialogues taking place in Trinidad between local producers of poultry, cassava and fruit juices, which are consistently being offered in foreign fast food franchises such as Pollo Tropical.

Under some franchises in the Caribbean, the issue of the scale of local production arises, with choices needing to be made between investing in meeting the new demand and serving traditional markets.

Nevertheless, such dialogue processes could open up new opportunities for addressing financing constraints on expansion of local agricultural production, as the prospect of new contracts allows better terms and conditions for bank loans to be secured for on-farm investment.

In some ACP countries, policy initiatives in this area, coupled with broader efforts to support information services on product requirements and markets and linked to support for contract farming arrangements, could ensure that the major changes under way in the retail sector, particularly in Africa, provide a significant boost to local agro-food sector developments.

Regional expansion of poultry companies intensifies trade policy debates in Namibia

According to press reports in March 2013, the Namibian Cabinet “is in the process of finalising negotiations to grant Infant Industry Protection (IIP) to the Namibian poultry industry”. Local multiple-retailers have told local producer Namibia Poultry Industries (NPI) to match the price of imported chicken or take their products elsewhere, but it is reported that local producers are unable to match the prices of imported products.

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While the bulk of imports come from South Africa, press reports make reference to imports of “low-cost, and allegedly low-quality, poultry products from Brazil”.

The Managing Director of NPI claims that the company is “losing millions at the moment” (an estimated N$6 million, or €504,300, per month) and is sorely in need of protection. He maintains that protection is needed in the short term while the local brand becomes established, staff are trained, and efficiency gains are made.

In Europe, data submitted on 26 March 2013 to the EU Advisory Group on Poultry and Eggs showed that in 2012 EU poultry meat exports to South Africa increased by 40% over 2011 levels, compared to an overall increase of only 1.3% in total EU poultry meat exports. (The increase in exports to other leading African recipients was 14.2% to Benin, 10.6% to Ghana and 0.07% to the DRC). By 2012, these four main African destinations were taking 26.2% of EU poultry meat exports (374,780 tonnes) compared to only 14% in 2009 (142,447 tonnes).

By the end of 2012, EU poultry meat exports to South Africa were almost 6 times larger than in 2010, accounting for 9.2% of total EU poultry meat exports in 2012, up from 0.8% in 2009.

EU poultry meat exports to selected African destinations in 2009–12 (tonnes)

2009 2010 2011 2012

Benin 84,912 115,066 126,212 139,559

South Africa 7,938 22,006 94,076 131,970

Ghana 28,694 41,066 68,979 69,025

DRC 20,903 27,749 29,972 34,226

Sub-total 142,447 205,887 319,239 374,780

Total EU world exports

1,015,784 1,354,610 1,412,110 1,430,658

Source: ‘Export of poultrymeat to selected destinations’, p. 22 of PowerPoint presentation, EC, 26 March 2013

Noting the potential for rapid growth in consumer demand for poultry meat across the Southern African region, other press sources have reported that the South Africa poultry company Rainbow Chicken has raised R3.9 billion (approx. €327.5m) to finance its strategic growth. It has bought a 64.2% share in Foodcorp, the third largest food company in South Africa, and a 49% stake in Zam Chick, from the parent company Zambeef. This acquisition, with its eight Zamchick Inn outlets, broiler houses, chicken abattoir and processing plant, is in line with both Rainbow Chicken’s aspirations to develop “its own retail value-added brands” and “quick-service restaurants” and also the growth aspirations of Zam Chick. Zambeef announced that it will help Rainbow Chicken to access its own existing retail outlets and to target new customers, including in Kenya and Nigeria.

This follows a very downbeat analysis from Rabobank of the prospects for the South African poultry sector, in contrast to the overall global prospects for the industry.

Sources

The Namibian, ‘Cabinet moves to protect poultry industry’, 12 March 2013 http://allafrica.com/stories/201303120695.html

EC, ‘EU market situation for eggs and poultry’, Advisory Group on Eggs & Poultry, downloadable from ‘Documents and presentations’ for 26 March 2013 http://ec.europa.eu/agriculture/consultations/advisory-groups/poultry-eggs/index_en.htm

Argentine Beef Packers, ‘Rainbow Poultry all cashed up’, 14 March 2013 http://www.meattradenewsdaily.co.uk/news/140313/south_africa___rainbow_poultry_all_cashed_up_.aspx

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Zambeef Products plc, ‘Who we are’, company web page http://www.zambeefplc.com/who-we-are/#GP

Zambeef Products plc, “Announcement of transaction’, 4 February 2013 http://ir.zambeefplc.com/profiles/investor/ResLibraryView.asp?ResLibraryID=60131&BzID=1988&Nav=0&LangID=1&s=0&Category=1788

Agrimoney.com, ‘EU, South Africa poultry groups miss out on upturn’, 28 February 2013 http://www.agrimoney.com/news/eu-south-africa-poultry-groups-miss-out-on-upturn--5574.html

Comment

In 2012, imports of poultry meat from the EU were equivalent to 9.5% of South African poultry production and around eight times the volume of Namibia’s annual poultry consumption. Significantly, while infant industry protection is being sought for the Namibian poultry sector, the question arises as to how this sits with the provisions of the draft EU–SADC EPA agreement and the EU–South Africa Trade, Development and Cooperation Agreement (TDCA). The South African Poultry Association has suggested that, in view of commitments made in trade agreements with the EU, measures other than tariff increases will be needed to deal with the increased volumes of poultry meat imports from the EU (see Agritrade article ‘South African poultry sector problems compounded by rising EU exports’, 15 April 2013).

Increasing competition on the South African market, along with projected consumption growth in the region, may well account for the corporate expansion of South African poultry companies into Southern Africa. This may see the consequences of expanded EU poultry exports to South Africa rippling across the region, as South African companies enter local markets and intensify competition for local producers. This could greatly complicate efforts to develop regional trade agreements covering trade in poultry meat, as highlighted by the current efforts to secure infant industry protection under the SACU agreement for the poultry sector in Namibia.

Sugar sector

Tate & Lyle Sugars argues for improved access to low-cost non-ACP cane sugar supplies

In April 2013, with the cost of importing sugar into the EU from preferred countries at a 10-month high, Tate & Lyle Sugars (TLS) expressed concerns, reported by Bloomberg, that sugar production quota abolition will allow EU beet processing companies “to produce and sell as much quantity as they wish”, while traditional refiners will not enjoy free access to their globally sourced raw sugar supplies. TLS called for “some kind of mechanism to allow the cane refiners to compete with fully liberalised beet and isoglucose sectors”.

Figures made available on sugar prices at the EC CAP management committee on 11 April 2013 showed that since the end of 2011, the gap between EU and world market prices for white sugar has been growing, with only a slight dip in the last month.

According to Bloomberg’s report, TLS representatives have argued that since “the ACP, LDC countries account for less than 5 percent of the world trade…, to continue to limit us to their supply volume wouldn’t be giving a parallel treatment.” TLS representatives insisted that “the EU must allow imports from elsewhere” in cases where ACP/LDC countries “cannot fulfil refiner needs”. TLS representatives also highlighted how certain north-western European sugar beet producers can produce sugar more cheaply than some ACP/LDC suppliers.

According to documents produced for the EC’s Advisory Group on Sugar, TLS’s concerns about the opening up of new sources of raw sugar imports are only partially addressed through the sugar tariff-rate quota (TRQ) arrangements under the Andean Pact and Central American FTA

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arrangements. These will provide access to only 246,000 tonnes of raw sugar in their first year of operation, increasing at a rate of 7,380 tonnes per annum. While India has requested expanded access for its sugar exports under the pending EU–India FTA, the EU continues to treat sugar as a sensitive product in these negotiations.

This has left the EU using a series of interim measures to improve availability of sugar on the EU market. Between January and March 2013, “the European Commission’s sugar management committee … authorised the import of 584,000 tonnes of white sugar…, nearly half the amount the EU is projected to approve this year.”

As noted in an article on the website Euractiv.com, the situation on the EU sugar market is of concern to others. The chief procurement officer for Unilever has estimated that the retention of the current EU sugar regime cost Unilever €26 million in 2012. This estimate is based on the difference between the EU and world market prices for white sugar.

Sources

Bloomberg.com, ‘Tate & Lyle urges EU to guarantee sugar supplies as costs soar’, 17 April 2013 http://www.bloomberg.com/news/2013-04-17/tate-lyle-urges-eu-to-guarantee-sugar-supplies-as-costs-soar.html

EC, ‘Advisory Group on Sugar’, web page giving point of access to ‘Latin America: Negotiation Mercosur; implementation of the agreements with Central America, Colombia and Peru (trade part): EU TRQs offered in future FTAs for raw sugar and sugar products’, documents and presentations, 4 March 2013 http://ec.europa.eu/agriculture/consultations/advisory-groups/sugar/index_en.htm

EC, ‘Advisory Group on Sugar’, web page giving point of access to ‘EU-India FTA’, Sugar Advisory, documents and presentations, 4 March 2013 http://ec.europa.eu/agriculture/consultations/advisory-groups/sugar/index_en.htm

Euractiv.com, ‘Sugar quota feeds bitter debate ahead of CAP vote’, 4 March 2013 http://www.euractiv.com/cap/sugar-quota-speaks-bitter-debate-news-518179

Comment

Tate & Lyle Sugars’ concerns that some ACP raw sugar suppliers produce more expensively than northern European beet processors need to be seen against the background of British Sugar’s ‘inside track’ to sugar produced in Southern Africa, which includes many of the lowest-cost sugar producers in the ACP.

British Sugar, TLS’s main UK competitor, has corporate links through its parent company ABF to Africa’s biggest sugar producer, Illovo Sugar, which through a joint-venture sister company plays an important role in the marketing of sugar from the Southern and Eastern African region.

This would appear to pose certain challenges for TLS in directly accessing the low-priced sugar produced in the ACP, with TLS’s ‘free market’ access being restricted to a number of the higher-cost ACP producers.

This in turn needs to be seen against the background of the investments made by British Sugar and other beet refiners in co-refining of beet and raw cane sugar.

For Tate and Lyle Sugars, it is not just about increasing supplies of imported raw sugar to the EU market, but also about expanding imports from low-cost producing countries, to which its competitors do not have an ‘inside track’.

This potentially complicates the ACP processes of alliance building on sugar sector issues.

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Interview: Points of view from ACP–EU stakeholders

Laurent Pipitone: “The ICCO is working to address the flaws in market mechanisms”

An interview with Mr Laurent Pipitone, Director of the Economics and Statistics Division of the International Cocoa Organization

Laurent Pipitone has worked for the International Cocoa

Organization since 2004 and has been Director of its Economics

and Statistics Division since 2011. He holds a master's degree in

economics from the University of Paris, Panthéon Sorbonne (Paris 1) and has previously undertaken a number of research and

consultancy projects at the Organization of American States (OAS) and the London Business School.

Since the collapse of the International Commodity Agreements in the 1980s, the international cocoa trade has been ruled by the futures market. The 2007–2008 food price crisis led many participants to question the operation of speculative markets of this kind, and in particular to examine their impact more closely. What is the current situation? How are these instruments viewed today? Laurent Pipitone gives us his analysis.

Q: There are a number of current initiatives aiming to make the cocoa supply chain more resilient and so increase global production. Is there a risk that these will eventually affect cocoa prices?

Chocolate manufacturers are expecting significant supply deficits over the long term, with cocoa trees aging and the average age of cocoa farmers also rising. In their view, much remains to be done before this trend is reversed.

Several years ago, after a number of consecutive years of deficit, the International Cocoa Organization (ICCO) was also concerned that we were entering a period of structural supply deficits. But the crisis that began in 2007–2008 led to a dramatic change in demand trends for cocoa and chocolate, and we are once again seeing supply surpluses. But for the economic crisis, it is estimated that 6 of the past 7 years would have recorded supply deficits.

In consequence, the ICCO thinks there is no real cause for concern in the short term, especially as cocoa stocks are high. But the

problem of structural deficit persists in the medium term. Cocoa growers remind us that, while we are constantly asking them to invest, they have no wish to produce surpluses that would prompt a fresh round of falling prices.

Long-term trends remain difficult to assess. It is hard to measure the impact of the various initiatives designed to promote more sustainable cocoa production. We have very little country-by-country information, with no data on the exact size of the planted area, and nothing profiling the plantations in different regions. Thus far our main long-terms concerns centre on the risk of supply deficits, so this is where we must focus our activity, while still endeavouring to improve our assessment of the situation on the ground.

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Q: Futures markets respond to speculation as well as market fundamentals. Given current levels of concern over the resilience of the cocoa supply chain, is this still the most appropriate market mechanism? Are the ICCO, multinationals and governments considering other pricing arrangements, alongside their training projects and schemes to distribute seeds and fertilisers?

Supply and demand remain the best means of determining prices on the international market. The cocoa futures markets in London and New York play a particularly important role, providing a benchmark figure which helps to determine the price payable. When prices rise on the two futures markets, so too does the farm-gate price, and vice versa.

The ICCO in the past acted to stabilise prices by releasing buffer stocks and maintaining prices within a given range, but this proved ineffective.

However, the operation of the market in general, and financial markets in particular, is far from perfect. For example, there is a lack of transparency regarding transactions concluded on the London cocoa market. We have insufficient information on the positions adopted by different market participants, whether speculators or the chocolate manufacturers who buy cocoa beans on the physical market, and on the concentration of these positions.

An external regulatory authority is required to prevent the acquisition of dominant positions, place limits on the positions taken by speculators, provide comprehensive statistics on authorised stocks, and publish the movements of market participants. Some progress has been achieved recently but it has not yet gone far enough.

Then, for the cocoa-producing countries at least, there are problems of making this data accessible to strengthen their position vis-à-vis the buyers, and especially of a lack of agricultural organisations and access to services.

We are addressing all these problems: transparency of markets and information, data collection, regulation of the futures markets etc.

A few years ago, we looked at the impact of financial markets on prices. Do they produce more or less price volatility, i.e. price increases and decreases linked to speculation? We also examined the purchase by a London-based hedge fund of more than 240,000 tonnes of cocoa futures contracts expiring in July 2010. The size of this trade gave the operator de facto control of the July futures market. Why did this happen and how can we avoid this kind of problem in future? We issued recommendations, and the London futures market responded by implementing a number of measures – insufficient maybe, but measures were taken.

So we have no problem with futures markets in principal, but we are working on ways of improving the way they operate.

Q: So you are not questioning the existence of commodities futures markets, in themselves a type of financial market?

What we do question is their operating environment and their regulatory regime. But, for us, the principle of a futures market is essential, because it is this financial market that provides us with a benchmark world price. We have no idea, for example, how much Barry Callebaut pays such and such a

cooperative for its cocoa beans. Only the financial market gives us a benchmark price for use by mutual agreement for all transactions on the world market. It provides a transparent means of conveying information.

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Q: But in the case of other commodities – such as flowers at the clock auction in the Netherlands, tea at the auctions in Mombasa, Calcutta etc., even tobacco in Zimbabwe – supply and demand are matched on a significant scale without the element of speculation evident on the cocoa futures market. These are markets that exist to provision the supply chain, not speculative financial markets...

The ICCO is thinking about setting up commodity markets in producer countries with a view to reducing transaction costs and rendering cocoa growers less vulnerable to price volatility and other risks, shortening the value chain and improving its effectiveness, strengthening the negotiating position of small growers, improving the supply and transparency of market information, and increasing access to sources of finance at reasonable cost. We are about to commission a feasibility study on creating such a system in Côte d’Ivoire.

We are optimistic that it will help to improve the income of cocoa growers and their standard of living, so contributing to a more sustainable cocoa economy. But bear in mind that there are a number of constraints. A variety of experiments conducted in East Africa in sectors other than cocoa have not all been productive. We are currently evaluating the situation.

However, the financial market as presently defined retains an important role in the transmission of information on prices, market liquidity etc.

Q: But markets such as those for flowers and tea also fulfil these conditions. In reality doesn't the role of speculation in food commodity markets still remain open to question?

This topic has prompted significant debate. The IMF, World Bank, UNCTAD, IFPRI and FAO combined to produce a number of studies under the auspices of the G20 during France's presidency 2 years ago. These studies did not conclude that financial markets produced distortions in physical markets. Although such distortions may occur in the short term, this is not the case in the long term.

We conducted similar studies a few years ago, examining price volatility and price levels, and we too were unable to identify

any medium- or long-term distortions engendered by financial markets. So short-term distortions may occur from one week to the next but they have only a short-term impact.

Overall, the majority of international organisations investigating the issue agree that, in a futures market, price movements are nearly always determined by fundamentals. Spikes may occur over a period of weeks, but these are almost always the result of an underlying fundamental, such as drought.

Q: So can we conclude that futures markets contribute in some degree to the resilience of the cocoa supply chain?

They play an essential role in the smooth running of the market. Despite a number of flaws and areas for improvement, they are

integral to the smooth running of physical markets.

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Launched by CTA (Technical Centre for Agricultural and Rural Cooperation ACP-EU) in 2001, the Agritrade website http://agritrade.cta.int is devoted to agricultural trade issues in the context of ACP (Africa, Caribbean, Pacific) - EU (European Union) relations. Its main objective is to better equip ACP stakeholders to deal with multilateral (World Trade Organization – WTO) and bilateral (Economic Partnership Agreement – EPA) negotiations. Thus it provides regular and updated information and analysis on technical aspects of the trade negotiations, developments in the CAP and their implications on ACP-EU trade, as well as on major commodities (banana, cereals, sugar, fisheries, etc.).

The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint ACP—EU institution active in agricultural and rural development in African, Caribbean and Pacific (ACP) countries. Its mission is to advance food and nutritional security, increase prosperity and encourage sound natural resource management. It does this by providing access to information and knowledge, facilitating policy dialogue and strengthening the capacity of agricultural and rural development institutions and communities in ACP countries.

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