Report Highlights:

Spain is the EU’s second largest cotton growing Member State after Greece. In MY 2014/15 area planted to cotton in Spain is expected to increase since farmers will likely switch from corn to cotton due to better expected crop margins. Another incentive to increase cotton area is to secure future CAP payments, as MY 2014/15 will be taken as a reference for future payments.

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)
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
N/A Not Available
GE Genetically engineered
Harmonized Codes for Lint Cotton (HS code): 5201
Q1: First Quarter
WMO: World Meteorologist Organization

Executive Summary

Spain and Greece are the only two EU MS that grow cotton. In Spain, the large majority of cotton production is concentrated in Andalucía, especially in the provinces of Cadiz and Seville. There is some minor cotton cultivation in other Spanish regions such as Extremadura and Murcia. This crop has critical environmental, social and economic implications in the areas where it is grown as it contributes to job creation and it is grown in areas where crop alternatives are limited.

Area and Production

While normally planting decisions depend on price expectations and water availability; this year potential subsidies will also play a key role in cotton plantings. 

According to ESYRCE, the large majority of cotton (over 90 percent) is grown under irrigation. Precipitation levels in the second half of winter prevailing until the beginning of spring have contributed to refill dams and improve soil moisture, which ultimately would favor cotton planting intentions. 

Favorable world prices since MY2010/11 have resulted in a steady increase of area planted to cotton, with the exception of MY2013/14, when adverse climate conditions reduced plantings. Area planted to cotton in MY2013/14 declined as spring rains delayed plantings and some farmers decided to switch to corn. 

Corn margins in MY2013/14 were below farmers’ expectations, as delayed plantings reduced yields and prices were lower than expected. Meanwhile, cotton farm gate prices in MY2013/14 were reportedly good. Additionally, the reduced area planted to cotton and hence the reduced cotton production resulted in increased area/production subsidies. The fact that the coupled support received by cotton farmers in MY2014/15 will be taken into account for Basic Payment cultivation as of 2015 will lead cotton farmers to maximize area planted to cotton at the expense of other alternative crops such as corn.

Final yields are normally determined by the absence of pests and weather conditions at the harvest season. The combination of adverse climate conditions in spring, which prevented proper soil conditioning and delayed planting operations and high pest incidence contributed to the yield reduction in Spain cotton producing regions in MY2013/14. 

As GE cotton varieties are not allowed for planting in the EU, farmers rely exclusively on the use of pesticides to reduce pest incidence. 

Persistent rains in since mid-December until mid-March have replenished soil water reservoirs and dams which grant irrigation supplies throughout the cotton growing season. In mid-March rains ceased and slightly above average temperatures dried the soil surface, which allowed for proper soil preparation. For optimum seeding additional precipitation prior to planting operations, which are usually carried out in early April, would be needed.

Consumption

The EU’s gin restructuring program reduced the number of ginning plants in Spain from 28 in MY2007/08 to only seven in MY2010/11. However, since MY2013/14 a total of eight ginning plants are operational, all of them located in Andalucía. 

According to industry in Spain 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 waste1.

Higher Value Products – Textile Products

The spinning industry activity showed some stability in 2011. In 2012, yarn and fabric production declined. Nevertheless, according to provisional data available, a marginal rebound might have taken place in yarn production throughout 2013 and further reduction would have taken place in fabric production.

The National Textile Industry Confederation (TEXFOR), that gathers cotton, silk, wool manufactures as well as fabric dyers, reports an improvement in their sales throughout 2013, and is optimistic about the evolution of the sector in 2014. Weak internal and external demand and low prices are seen as the sector’s major threats.

Trade

Spanish cotton lint exports, which exceed imports, are mainly directed to other EU MS, followed by China, Morocco and Bangladesh. Spain cotton lint imports mainly originate in Turkey and Pakistan.

Policy

Cotton Specific Support

Cotton production in Spain suffered a significant decline in 2006 due to the implementation of the EU cotton reform, reaching a record low in MY2008/09 in terms of area. 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. At present, the level of cotton specific payments varies every year depending on the final subsidy-eligible cotton area. The budget is fully used even though correction factors are needed to calculate the area payment. In broad terms, 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/17/2014 establishes the requirements to be granted with the cotton specific premium in MY2014/15, which consists on:

• Only agricultural plots that were not planted to cotton2 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.

The government of Andalucía issues yearly a Regional Order establishing additional requirements to be granted with the Cotton Specific Premium that includes minimum yield levels. For MY2013/14 minimum yields were set at 1000 Kg/ha if the cotton is grown under irrigation and 500 Kg/ha if the cotton is grown on non-irrigated land. However, given the adverse climate conditions prevailing during the cotton crop cycle and the high pest incidence, target yields were revised down to 300 Kg/ha for specific areas where yields were severely affected by climate conditions or pest incidence.

Cotton Quality Premium

Since MY2012/13 area quality premium regulated by Article 69 (Regulation (EC) 1782/2003) has been replaced by a production quality premium. Total budget for this program amounts to 13.4 million Euros. However, cotton payments under Article 68 (Regulation (EC) 73/2009) vary every year depending on the amount of cotton that is eligible for the quality payment. The additional quality requirements to be met include: moisture content below 11.5 percent and waste below 5 percent. Normally, the large majority of the cotton produced and delivered to ginning plants complies with these established quality requirements. 

Integrated farming payments

It is not available for cotton farmers since MY2013/14. These support could be renewed under the new Regional Rural Development Plan, nevertheless, it will not be available in MY2014/15 as the Regional Development Plans have not been developed yet.

Support for Cotton as of 2015

Future prospects for Spain’s cotton sector are closely tied to the developments in the subsidy scheme. Under the new CAP, cotton will continue to receive the cotton specific support as established by Spain’s Accession Treaty.

On the contrary, the quality premium for cotton will no longer be available. No specific subsidy will be allocated to cotton under the new CAP. However, in the calculation of the Basic Payment the specificities of the cotton crop will be considered and the amount of support received as basic payment will include the support granted to this sector under Article 69. The total budget under Article 69 that will be added up to the Basic Payment adds 13.4 million Euros. The reference period for basic payment calculation in the case of cotton farmers will be MY2014/15. This serves as an additional incentive to increase cotton plantings in the current season so that the use of the quality premium is maximized and hence the full budget of 13.4 million of Euros becomes of the part of the cotton farmers’ single payment. In Spain, prior to the latest CAP reform, the value of the Single Payment was linked to amounts received under the previously existing coupled schemes. As a result, the amount received varied tremendously among the different autonomous regions and different farmers depending on the type of their agricultural activity they carried out throughout the reference period considered. The only information available regarding the support received by farmers is Single Payment Scheme Average data (Euros per Hectare).

As of 2015, the Single Payment Scheme will be replaced by the Basic Payment as agreed in the recent CAP reform. Spain has opted for a region-based system. A total of 316 counties in Spain will be considered. The basic payment calculation for these counties will be based on agronomic counties. Four different land uses will be considered: irrigated land, non-irrigated land permanent crops and pasture land. Other factors such as the amount of support previously received will be taken into consideration for the subsidy calculation in order to create between 22 and 24 regions with similar support levels