Last planting season, in order to secure the maximum CAP payments for the period 2015-2020, farmers boosted planted area and production. Area planted to cotton in MY 2014/15 in Spain is anticipated to decline and production to return to average levels. The cotton processing industry reports an increase in production of fabrics throughout 2014, while yarn production declined.

Abbreviations used in this report

EU European Union

FAS Foreign Agricultural Service

GTA Global Trade Atlas

MS EU Member State(s)

MT Metric ton (1,000 kg)

Bales (1 Bale = 226.8 kg)

MY Marketing year (Aug/Jul)

MAGRAMA: Ministry of Agriculture, Food and Environment

ESYRCE Annual Survey on Crop Area and Yields

PS&D Production, Supply and Demand

Ha Hectares (1 Ha = 2.471 acres)

N/A Not Available

GE Genetically engineered

Harmonized Codes for Lint Cotton (HS code): 5201

Q1 First Quarter

Executive Summary

Spain is the EU's second largest cotton growing Member State after Greece. Cotton production in Spain is concentrated in Andalucía, Spain's southernmost peninsular region. Cotton is a critical crop from the environmental, social and economic point of view in the areas where it is grown, as alternatives are limited.

Area and Production

Area planted to cotton varies depending on price expectations and water availability, competition by other crops and subsidies available. In MY2014/15 subsidies played a key role in planting decisions.

The MY2014/15 Cotton Quality Premium was used as a basis for Basic Payment calculation for 2015 under the reformed CAP for the period 2015-2020. As a consequence, in MY2014/15 farmers maximized area planted to cotton, in order to secure future payments and incorporate the full budget of 13.4 million of Euros to the Basic Payment.

To be granted with the Cotton Quality Premium, which would ultimately became part of the Basic Payment, certain minimum quality standards need to be met. Consequently; cotton farmers were especially careful with this crop development in MY2014/15.

Area planted to cotton in MY 2015/16 in Spain is anticipated to return to average levels, as securing CAP payments are no longer an incentive. Also, lower prices received by farmers in MY2014/15 would discourage cotton plantings in MY2015/16 . Water availability will not represent a major constraint for cotton cultivation and competition by other crops (sugar beet, corn, tomatoes for processing) is limited.

Spain's Farm Gate Raw Cotton Price

MY

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15e

Price (Euros/100 kg)

29.90

22.62

46.03

56.35

38.36

44.44

35.00

Source: MAGRAMA and FAS Madrid estimates.

Mild temperatures in August delayed cotton development by about two weeks. However, this had no significant impact on final yields as warm temperatures continued until mid-October, which facilitated development and harvesting operations. Actually, yields registered the highest levels since 2006.

Cotton Area, Production and Yields

MY

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16f

Area

(1,000 Ha)

58.6

63.2

67.1

69.8

64.0

75.0

65

Production (1,000 MT)

79.2

115.1

182.8

191.7

145.6

225.1

167

Yields (Kg/Ha)

1,352

1,821

2,724

2,745

2,272

3,000

2,565

Source: MAGRAMA and FAS Madrid estimates.

Currently, water reservoirs at the national level are at 74.9 percent of total storage capacity, which equals 41,911 hm3 of water. In the Guadalquivir basin, in which the large majority of the cotton is grown, water reservoirs are at 81.3%, somewhat below previous year levels but well above the 10 year average. Hence, no restrictions are anticipated for irrigation purposes. In mid-March rains ceased and above average temperatures dried out the soil surface. For optimum seeding, additional precipitation before early April would be needed.

Consumption

Spain has eight ginning plants, of which only seven are currently operational. All Spain based ginning plants are located in Andalucía.

According to Spanish industry, raw cotton processing rates are as follows:

  • Cotton Lint yield = 32-33% (national weighted average) of total Seed Cotton delivered to ginneries
  • Cottonseed yield = 54% (national weighted average) of total Seed Cotton delivered to above ginneries
  • The remaining 13-14% is moisture and waste (Average moisture and waste content comply with quality requirements for the Cotton Quality Premium).

Higher Value Products – Textile Products

The Association for Industrial Textile Cotton Processing reports an increase in fabric production throughout 2014, while yarn production has declined. According to them, despite an increase of domestic demand in 2014, exports to other EU members in 2015, will be critical for the cotton industry evolution.

Cotton Yarn and Fabric Production (MT)

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014p

Yarn

110,768

79,527

72,507

65,949

44,013

38,030

40,198

39,275

35,215

36,659

34,473

Fabrics

112,466

96,501

80,608

47,766

30,815

27,888

29,059

29,666

28,620

27,790

29,735

Source: AITPA (Association for Industrial Textile Cotton Processing)

p: provisional data

Trade

Spanish cotton lint exports largely exceed imports. Other EU Member States are their main destination, followed by Morocco and Indonesia. Spain cotton lint imports originate mainly in Cameroon, Pakistan and Turkey.

Spain Exports of Cotton Lint (MT)

Country of Destination

MY2011/12

MY2012/13

MY2013/14

MY2014/15 Q1

EU-28

19,299

17,674

12,710

13,198

Morocco

4,432

6,485

7,006

2,767

Indonesia

1,781

2,820

6,017

3,180

China

23,385

14,667

4,593

991

Bangladesh

3,174

5,254

3,196

13,319

Vietnam

1,105

1,094

3,194

2,368

Thailand

205

1,681

2,939

725

Pakistan

101

220

1,550

386

Turkey

452

620

1,330

949

Others

2,739

6,879

2,039

4,856

TOTAL EXPORTS

56,673

57,394

44,574

42,739

Source: GTA.

Spain Imports of Cotton Lint (MT)

Country of Origin

MY2011/12

MY2012/13

MY2013/14

MY2014/15Q1

EU-28

1,024

478

82

24

Cameroon

200

-

659

120

Pakistan

900

599

613

167

Turkey

381

728

160

196

Burkina Faso

266

47

75

-

Mali

100

-

25

-

Argentina

422

-

-

-

Korea, South

238

61

-

-

Cote d Ivoire

232

299

-

-

India

71

15

-

-

Others

48

1,128

1,351

599

TOTALIMPORTS

3,882

3,355

2,965

1,106

GTA.

Policy

At the moment the Cotton Specific Support, as established by Spain's EC Accession Treaty, serves as the only policy incentive for cotton production. Since MY2015/16 the Cotton Quality Premium is no longer available nor is the Integrated Farming Payments either since MY2013/14.

In 2015, the Single Payment Scheme has been replaced by the so-called Basic Payment, which is not crop specific. Spain has opted for a region-based system. A total of 316 counties in Spain were considered. The Basic Payment calculation for these counties takes into account four different land uses: irrigated land, non-irrigated land permanent crops and pasture land. Other factors such as the amount of support previously received have been considered. As a result, a total of 50 regions have been defined. These regions will be granted with different levels of support, which will only be determined once the 2015 applications are submitted.

Broadly speaking, the amount of the Basic Payment allocated to each region defined will represent the support granted to the type of land use. The amount of support received will be calculated based on the subsidies received in 2014. In the irrigated land in the Guadalquivir basin, where most of the cotton is grown, industry sources estimate that Basic Payment would add up to about 450 Euros per hectare. Also, a large part of the support received by farmers will be linked to greening measures compliance.

Cotton Specific Support

In 2006, area planted to cotton in Spain suffered a significant decline in as a result of the implementation of the EU cotton reform, reaching a record low in MY2008/09.

In MY2009/10 the Regulation (EC) 637/2008 introduced some amendments to the cotton regime: national guaranteed area was reduced from 70,000 ha to 48,000 ha with a total budget of 67.2 million Euros.

Since MY2009/10 the cotton aid increased in value per hectare, but less acreage can benefit from this payment. Specific conditions to be eligible to receive this coupled support are defined on a yearly basis in Spain's National Gazette.

Ministerial Order AAA/188/2015 establishes the requirements to be granted with the cotton specific premium in MY2015/16, which consists on:

  • Only agricultural plots that were not planted to cotton (Plots below 10 Hectares exempted from this requirement) in the previous season, but that at least were planted to cotton once in the marketing years 2000/01, 2001/02 or 2002/13, can be subject of this specific support.
  • Only cotton varieties contained in the EU Plant Varieties Common Catalogue will be receiving the cotton specific support premium.
  • Seeding density should be over 100,000 plants per hectare in irrigated plots and over 90,000 plants per hectare in non-irrigated plots. Seeding density can be just 75,000 plants per hectare in case of interspecific hybrid varieties.
  • Crop should develop under normal conditions and be harvested. Production obtained must meet minimum quality requirements.

Currently, the budget for the Cotton Specific Payment is fully used even though correction factors are needed to adjust the reference area payment to the actual subsidy-eligible area.

Since MY2014/15 the reference amount for the area payment has been revised down from 1,400 Euros/Ha to 1,267.53 Euros/Ha. This, together with the increase of area planted to cotton explains the reduction of the Cotton Specific Payment in MY2014/15.

Subsidies

Support Scheme

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16f

Specific payment adjusted (€/ha)

1,190

1,105

1,024

983

1,060

825

935

Article 69 payment (€/ha)

480.47

289.81

224.75

-

-

-

-

Article 68 payment (Euros/MT)

-

-

-

77.68

95.12

57

-

Basic Payment

-

-

-

-

-

-

N/A

Integrated farming aid:

-

-

-

Under 40 ha.

350

350

350

350

Between 40 and 80 ha.

210

210

210

210

More than 80 ha.

105

105

105

105

Source: FEGA and FAS Madrid estimates.

Production, Supply and Demand Data Statistics

Cotton

2013/2014

2014/2015

2015/2016

Market Begin Year

Aug 2013

Aug 2014

Aug 2015

Spain

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Planted

0

0

0

0

0

0

Area Harvested

64

64

75

75

0

65

Beginning Stocks

57

57

61

35

0

35

Production

220

220

325

340

0

251

Imports

14

13

10

13

0

13

MY Imports from U.S.

0

0

0

0

0

0

Total Supply

291

290

396

388

0

299

Exports

204

194

300

287

0

207

Use

26

62

25

66

0

70

Loss

0

0

0

0

0

0

Total Dom. Cons.

26

62

25

66

0

70

Ending Stocks

61

35

71

35

0

22

Total Distribution

291

291

396

388

0

299

1000 HA, 1000 480 lb. Bales, PERCENT, KG/HA