Prices, institutions, and determinants of supply in the Malian cotton sector

Authors

  • Veronique Theriault,

    Corresponding author
    1. Department of Agricultural, Food, and Resource Economics, 446 W. Circle Drive, room 213-B, Michigan State University, East Lansing, MI 48824, USA
      Tel.: +517-353-7856; fax: +517-432-1800. E-mail address: theria13@msu.edu (V. Theriault)
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  • Renata Serra,

    1. Center for African Studies, 421 Grinter Hall, PO Box 115560, University of Florida, Gainesville, FL 32611, USA
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  • James A. Sterns

    1. Department of Food and Resource Economics, 1155 MCCA, PO Box 110240, University of Florida, Gainesville, FL 32611, USA
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  • Data Appendix Available Online A data appendix to replicate main results is available in the online version of this article.

Tel.: +517-353-7856; fax: +517-432-1800. E-mail address: theria13@msu.edu (V. Theriault)

Abstract

Cotton, both a source of livelihood for millions of poor rural households and a major source of export revenues, is a vital commodity for the economic and social development of Mali. Inefficiencies in the Malian cotton system at the ginnery and producers’ cooperative levels (e.g., late payment to farmers and poorly functioning credit schemes) have recently led to an important decline in supply, threatening the sustainability of the sector. Using regional data from 1998/1999 to 2008/2009, this study aims to quantitatively assess the contribution of key determinants, such as cotton prices and timely payment, toward the downward trend in cotton area. A dynamic supply model, based on adaptive expectations and partial adjustment, is employed to estimate the effects of prices and institutional factors, such as credit recovery rates and date of payment to farmers, on the Malian cotton supply. Results show that supply responds significantly to cotton prices relative to cereal and fertilizer prices. Date of payment varies across agricultural cycles and late payment negatively influences land devoted to cotton. Low credit repayment rates create disincentives to grow cotton. Therefore, the revitalization of the Malian cotton sector depends upon getting both prices and institutions right.

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