Cartagena de Indias, Colombia

Transcription

1 ARGENTINA REPORT Cotton Production Status and Outlook 72 nd ICAC PLENARY MEETING (INTERNATIONAL COTTON ADVISORY COMMITTEE) MINISTRY OF AGRICULTURE, LIVESTOCK AND FISHING OF ARGENTINA Cartagena de Indias, Colombia Emergent challenges facing the cotton value chain

2 TABLE OF CONTENTS 1. PLANTED AREA 2. PRODUCTION AND MARKETING 3. EXPORTS 4. IMPORTS 5. CONSUMPTION 6. THE ARGENTINE COTTON VALUE CHAIN 7. MAIN TECHNOLOGICAL CHARACTERISTICS OF ARGENTINE COTTON LINT 8. CULTIVARS 9. NEW TECHNOLOGIES 10. THE TEXTILE INDUSTRY IN ARGENTINA 11. MAIN MAGyP AND INTA COTTON INITIATIVES /14 SEASON OUTLOOK 2

3 1. PLANTED AREA The total area planted to cotton in the 2012/13 season amounted to 410,650 ha, which reflects a 34% reduction compared to the cotton area the previous season. Of that area, 88% (361,770 ha) was actually harvested. This difference is attributable mainly to adverse weather conditions (water stress and high temperatures). The same situation is evident in raw cotton yield (cotton with seeds) per hectare, where productivity was also affected even in irrigated areas. About 91% of the area was planted in rainfed conditions and the remaining 9% was irrigated. 99% was planted within the area outlined in green on the map. Table N /13 CROP YEAR - Planted, Lost and Harvested Area; Raw Cotton Yield and Production (with seeds). N,&#*?#O09)%%)$0!,)-/$2&!"#$%&' ()*% +#,-&*%&'./&"'0!,)'12%/)$ 0034# # # #5 3%5 94#2)!"#$%&& '$&#&!()$!(&!$('&!)!$))) :;0'&"0<*%&,)!%*$%#* %%$)*&!&%$(%*!$"+&!")$()* :#$%#0=&!!%$&&&!#$*&& )"$*&&!$#"%!+"$+!) =),>)*#!)$&&& (&&!'$#&&!$%%) %%$)'% :#"%# ($&&& ($&&& ($%&& )$+&& :#$0(1/* %$'&& %$'&& "$&&&!!$%&& <$%,&0?/)* '*& '*&!$!+& )'+ 9),,/&$%&* "**!& ""*!$*&& ++' 9),')@# #& *& %& %$*&& *& 9)1$%,A0B)%#"0 CDEFGHE CIFIIE JGDFKKE DFHLC HHDFCMM Source: MAGyP and private sector. Provisional figures, subject to modifications and adjustments. As regard to the distribution by provinces, Chaco continues to be the main producer with 36% of the planted area, followed by Santiago del Estero and Santa Fe with 31% and 27%, respectively. Together, these three provinces account for 94% of the total area planted to cotton in Argentina. 3

4 CHART N 1 AREA PLANTED, HARVESTED AND RAW COTTON PRODUCTION (WITH SEEDS) IN ARGENTINA - PERIOD 1999/00 TO 2012/ Ha/Tn Ha. Sembrada Ha. Cosechada Producción Algodón Bruto /00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12* 12/13* Source: MAGyP and private sector. Provisional figures, subject to modifications and adjustments CHART N 2 Distribution of area planted to cotton and harvested by provinces, 2012/13 season 1 Provisional figures, subject to modifications and adjustments. 4

5 CHART N 3 2. PRODUCTION AND MARKETING The 2012/13 season has been again an abnormal year as already mentioned above. The provisional figure estimated for the planted area as of 08/22/2013 is ha, with a loss of 48,880 ha. The remaining 361,770 ha were harvested. Ginning is still ongoing to date in some areas due to adverse weather conditions experienced throughout the cotton year, mainly water stress and high temperatures. In the case of the boll weevil, Anthonomus grandis, B., contrary to 2011/12, there were no significant attacks in the cotton areas. Also, there are plots where stubbles have not been destroyed yet nor preventive measures adopted to fight against this pest. It should be noted that there are producing provinces in the Northwest where this pest has not been detected yet. For all the above reasons and according to the data in the respective chart, the production of raw cotton (cotton with seed) would be provisionally estimated at 551,500 tons and production of lint at a volume of about 157,180 tons. Note that these are provisional figures that are subject to modifications and adjustments. The use of stripper machines for harvesting determines a lower ginning yield compared to cotton picked by hand or picker equipment. Stripper machines with built- in pre- cleaning systems increased in this crop year. However, the number of stripper harvesters with this feature is still not enough to meet the volume of cotton produced in a timely and appropriate manner. Also, there is a shortage of module builders and transport units to ginning plants. 5

6 With regard to the narrow row cropping system, there has been an increase in lint yield per hectare (due to higher volume of raw cotton production) that it is likely to continue improving as pre- cleaning systems are built into stripper harvesters that will allow to increase lint yields from harvested materials. The Argentine Cotton Chamber quotes for the estimated simple average Domestic Market for cotton lint (Grade C ½) for the period January- December 2012 was U$S 1,890/ton for a - 28% decline over the 2011 season. So far this year, the average price is U$S 1,950/ton, i.e. a 3% increase (as of August 21, 2013) over the 2012 average. Although this year there have been minor attacks of the cotton boll weevil, Anthonomus grandis, B., the situation described does not contribute at all to its control and eradication. Therefore, all players in the sector should focus on fulfilling their responsibilities to prevent the further expansion of this pest. CHART N 4 Average Cotton Lint Prices, Cotlook A Index and Domestic Market Grade C 1/2 U$S/tn Indice "A" Int. C1/2 3,500 3,000 2,500 2,000 1,500 1,000 0,500 0, *2013 *Average Price as of August 30, Source: Prepared by the author based on COTLOOK and Argentine Cotton Chamber data. 6

7 CHART N 5 Raw Cotton (with seeds) and Lint Production - Period 1999/00 to 2012/13 1 Toneladas ALG. BRUTO FIBRA Toneladas Source: Prepared by the author based on MAGYP and private sector data. Provisional figures subject to readjustments CHART N 6 Raw cotton production (with seeds) by provinces, 2012/13 Season ( * ) Producción de Algodón en Bruto S.del Estero 27,1% Formosa 4,2% Santa Fe 29,8% Chaco 34,8% Otros 2,3% Salta 1,7% *Provisional percentages, subject to readjustments. 1 Provisional figures, subject to modifications and adjustments. 7

8 3. EXPORTS Argentina has traditionally been an exporter of cotton lint, although export volumes did not reach significant amounts until The average over the last 41 years is about 75,000 tons/year. In 2012, according to SENASA s figures, lint exports accounted for 39,633 tons, valued at U$S 55,563,000 and an average price of US$ 1,402/ton. Compared to 2011, the exported volume declined significantly (- 42%) since exports in that year amounted to 68,068 tons, at a value of U$S 144,748,000 and an average price of US$ 2,127. CHART N 7 Export Destinations for Argentine Cotton Lint. Year Toneladas At August 31, 2013 (8 months), lint exports amounted to 16,225 tons. Export destinations of Argentine cotton lint at August 31, 2013 are Southeast Asia 92% and America 8 %. 4. IMPORTS Throughout its cotton history, Argentina has never been a leading importer of cotton lint. For the most part, the country imported lint when domestic production was unable to meet the needs of the national industry due to weather issues. Argentina became a net importer from 2002 to 2009 as a result of increased activity in the textile industry, adverse weather conditions, and the decline in planted area in cotton years 2001/02 and 2003/04 to amounts similar to those of 1932/33 and 1934/35 (69 and 66 years ago), caused by the decline in international prices. 8

9 Over the past 41 years, Argentine cotton lint imports averaged about 14,000 tons/year. With respect to the period 2000/2012, the average was 23,478 tons. In 2012, lint imports amounted to 7,516 tons, valued at U$S 16,686,000, at an average price of U$S 2,220/ton. Note that there was a slight increase compared to 2011 when imports reached 5,964 tons, valued at U$S 14,156,000, at an average price of U$S 2,374 per ton. During the first 7 months of 2013 (August 31, 2013), lint imports reached 3,753 tons. Most of the imported lint (98.67 %) came from Brazil, Turkey (1.28%) and other countries (0.05%). CHART N 8 Sources: INDEC.*SENASA as of August 31, 2013 CHART N 9 Cotton lint Exports and Imports Importación Exportación * Sources: INDEC.*SENASA as of August 31,

10 5. CONSUMPTION Consumption of cotton lint in Argentina has been increasing since the 2001/02 season with circumstantial decreases (2008 and 2009). For 2013, it is estimated at around 135,000 tons. CHART N 10 Cotton lint consumption, Period Sources: INDEC. FADIT- FITA, surveys sent to ICAC. *Own forecast as of 09/12/13 TABLE N 2 Y E A R CONSUMPTION CONSUMPTION Y E A R (in t) (in t) , , , , , , , , , , , , , , , ,000 * , * ,000 Sources: INDEC. FADIT- FITA, surveys sent to ICAC. *Own forecast. The drop recorded after 1997 was primarily due to increased imports of all Kinds of Textiles, Clothing and Garments, resulting from the opening of our country s economy in the 1990s. During the period, Argentina faced a socio- economic crisis that caused a sharp 10

11 decrease in the real income of most of its population, which discouraged any growth in consumption. This trend began to change as of 2002 as a result of the exchange rate policy adopted that made the Argentine textile industry more competitive, allowed a gradual increase in labor employment and increased the real income of the population. This also led to a steady increase in cotton lint consumption from that year up to 2009 when it declined as a result of the international crisis and its impact on our country. Consumption recovered between 2009 and 2010, but declined by about % in THE ARGENTINE COTTON VALUE CHAIN Data from the 2012/13 season show that 551,500 tons of raw cotton were harvested, and it is estimated that the total volume will be ginned. Lint output would account for 157,200 tons while 286,800 tons of seed were recovered, of which tons are intended for oil production, tons for forage, 22,944 tons for planting and 1 ton for export. These are provisional figures subject to modifications and adjustments. It is worth noting that there are currently some 91 gin mills in operation or about to start operating with a ginning capacity of 1,771,500 tons. 62% of that capacity is located in the province of Chaco. Source: Prepared by the author based on INTA s Agroindustrial Value Chain circuit 7. MAIN TECHNOLOGICAL CHARACTERISTICS OF ARGENTINE COTTON LINT 11

12 The Cotton Lint Technology Laboratory at the Agricultural and Livestock Experimental Station run by INTA in Presidencia R. Saenz Peña, Province of Chaco, has established a set of standards that are currently used to characterize the main technological parameters of Argentine cotton lint, as described in the table below: TABLE N 3 Concept Length Strength Micronaire Mm g/tex Index Very high More than 30.0 More than 31 More than 5.0 High 29.1 to a to 5.0 Medium 27.1 to a to 4.5 Low 26.0 to a to 3-6 Very low Lower than 26.0 Lower than 22 Lower than 3.2 It is interesting to note that a statistical review put together by the abovementioned laboratory covering the period , showed that the main technological parameters of Argentine cotton lint had evolved as follows: staple length went from close to 25 mm or less to close to or over 28.0 mm; staple strength increased to g/tex by Stelometer. The Micronaire index also has progressively increased and ultimately stabilized at around 4.2 ug/inch in recent years. The average values of these parameters indicate that the staple length, strength and Micronaire index of the Argentine cotton lint are within the range considered to be medium by international standards. However, with the increasing introduction of stripper harvesting, many of these values may not be reflected due to the transformation in production and ginning practices. Nevertheless, it is worth noting that in those cases where narrow row and stripper harvesting technologies are used, the technological parameters can match and maintain those values above mentioned, provided that technical criteria in line with these production systems are applied. 8. CULTIVARS For maximizing lint yields in the current production systems, it is necessary to choose the right variety and manage technology appropriately. INTA, the National Institute for Agriculture and Livestock Technology, is the leading institution in Argentina involved in developing improved breeding materials with high production potential, excellent health and quality of fiber, which have extensively occupied the various production environments of the country. Currently, the Institute has seven conventional varieties of excellent agronomical performance: Guazuncho 3 INTA, Poraite INTA, Oroblanco 2 INTA, La Banda 300 INTA, Chaco 530 INTA, Cacique INTA and Gualok INTA. 12

13 On the other hand, the private sector, through Genetica Mandiyu, markets GM varieties with 2 genes: lepidoptera- resistant (Bollgard I) and glyphosate- resistant RR (Round up Ready). Three varieties are noted, two with both genes (DP 402 BG/RR, Nuopal RR) and a single RR called Guazuncho 2000 RR. Two of the materials mentioned, DP 402 BG/RR y Guazuncho 2000 RR, were co- developed by INTA and Monsanto. Although there are ten varieties, considering both conventional and transgenic materials, only one of them, Nuopal RR, currently occupies over 70% of the planted area. This variety was introduced in the 2009/2010 season followed by DP 402 BG/RR and ultimately Guazuncho 2000 RR. It is worth noting that the area planted to insect- and herbicide- resistant cottons reflects that the adoption of technology exceeded 98%. However, in the 2012/2013 season the Argentine cotton producers created a demand for conventional varieties arguing the need for germplasm with high lint mill yield, a feature that led to a slight decline in the most widespread varieties as shown in Table No. 1. In addition, the varietal demand is usually determined by high lint yield materials of adequate quality, short to intermediate cycles and total resistance to Lepidoptera and herbicides. Therefore, research in the public and private sector aims at developing varieties with these characteristics and new insect- and herbicide- resistant genes are currently under evaluation. Table N 1 Agronomic data of 5 varieties and 1 experimental line related to the trial network of the National Institute for Agriculture and Livestock Technology INTA. Data of Presidencia Roque Saenz Peña, Chaco, distance of 0.48 m, 2010/ /2012 period Variety/line Yield Mill Yield Lint technological parameters (kg lint/ha) (% lint) Length (mm) Strength Uniformity Micronaire (gr/tex) DP 402 BG/RR SP Guazuncho3 INTA Nuopal RR Guazuncho Poraite INTA Source: INTA EEA Saenz Peña, Chaco, Argentina 9. NEW TECHNOLOGIES The new technologies in Argentina are significantly increasing competitiveness and environmental sustainability. Essentially, two technologies stand out: biotechnology and narrow row planting. a) Biotechnology The increasing adoption of GM varieties led to significant changes in production systems that were also seen in other countries. Genes introduced into the varieties allow expressing the progress achieved in conventional breeding. 13

14 Through a Technological Linkage Agreement with Chaco, Santiago del Estero, Santa Fe and Formosa cotton provinces, INTA (National Institute for Agricultural and Livestock Technology) carries out research work aimed at generating knowledge and clean technologies for the control of the boll weevil (Anthonomus grandis, B.). During the first stage of the agreement, tools have been developed to support the breeding program by creating new combinations of alleles; studying entomopathogenic fungi and bacteria for biological pest control; acquiring in- vitro culture and genetic transformation technologies; identifying target sequences in Coleoptera by RNA interference- mediated gene silencing, and analyzing the intellectual property involved in the various methodologies. The activities are developed simultaneously at Saenz Peña Agricultural and Livestock Experimental Station of the Chaco- Formosa Regional Center and Castelar s Institutes of Genetics, Biotechnology, Microbiology and Agricultural Zoology. Further work is currently underway on these technologies to tackle the boll weevil control. A second stage has been suggested to continue with the agreement in which tools and knowledge developed may be used to create a product for the boll weevil control. In addition, it is likely that these technologies can be applied to solve other cotton problems (blue disease, Lepidoptera, drought, among others). b) Narrow row planting Applied in over 70% of Argentine cotton area, the narrow row planting technology allows increasing agricultural yields between 20% and 30% in laboratory trials and producing even higher yields in commercial scale trials. This technology can be defined in terms of high population density plants (200,000 plants per hectare at harvest on average) and new spatial designs (0.52 m to 0.32 m in- line distances, i.e. a distance 52% to 64% lower than conventional systems, from 0.90 to 1 meter), with controlled vegetative and reproductive growth (regulation of plant height and fructification from 3 weeks to retain first position setting), and a production cycle of days. The narrow row technology also shortens the crop cycle up to 55 days shorter than with conventional systems. This allows clearing the field earlier and growing two crops per season, and reducing the cycle of harmful pests, such as the boll weevil, Anthonomus grandis, B., the cotton borer, Eutinobothrsus brasiliensis, and the pink bollworm, Pectinophora gossipiella. Furthermore, the use of herbicide- resistant seeds for a more effective weed and leaf- cutter resistant seed control facilitates crop management and allows reducing the use of agrochemicals resulting in lower costs and less pollution for both the producer and the environment. The introduction of this technology allows greater soil coverage that serves like a sunscreen for better use of light, radiation, nutrients and moisture, which translates into increasing yields per hectare. 14

15 The narrow row planting technology also created the need to solve the harvesting issue quickly. On one hand, picker (spikes) harvesting systems have to adjust to new distances; and on the other, there have been a rapid growth of stripper systems (pullers). In the first stage, platforms have been developed for picker harvesters to replace the original factory system, and then cleaners have been introduced to improve the quality of harvest (better cleaning). As a result, the private sector is increasingly developing harvesters with the above- described systems. INTA has developed its own innovative drag- type stripper harvester with cleaners, i.e., it is not self- propelled but towed by a tractor with at least 50 HP and equipped with power takeoff. INTA patented and licensed this innovation for commercial manufacturing under a Technological Linkage Agreement signed with Dolbi, S.A., a company from Santa Fe. Its main competitive feature is low investment and operating cost (about US$ 15 per ton of raw cotton (with seed). Despite all of these benefits of the narrow row planting technology, there is ongoing research to overcome some of its limitations, namely: higher implementation cost stemming mainly from higher seed costs, as well as the need to increase harvester efficiency. Recently, a cotton harvester equipped with a stripper header and a built- in cleaning system was presented. This machine can condition and deliver cotton in cylindrical modules. Its main feature is the capability to form medium- size cylindrical compact modules or bales of harvested cotton that are covered or wrapped with a stretch- type plastic film that maintains their shape and protects cotton from contaminants or damages caused by environmental events (dust, rain, wind, etc.). 15

16 . The modules weight about 700kg to facilitate their handling at loading, transport and other movements from lifting equipment either power- driven or mounted on tractors. Operation of the machine, and during harvesting, cleaning, temporary accumulation, module building, wrapping and unloading are carried out without stopping the harvester and controlled by sensors and monitored by the operator. Some of those processes operate automatically. This resource attempts to overcome and rationalize the difficult task of handling bulk cotton dumped from harvesters to the ground with the resulting contamination with dust, debris or stubbles, among others, followed by the hard, risky and outmoded manual- mechanical loading operation on trucks. The Mechanical Development Group of INTA s Reconquista Agriculture and Livestock Experimental Station designed and built the experimental harvester prototype through the Technological Linkage Agreement with the Association for the Promotion of Cotton Production (APPA, for its acronym in Spanish) and Dolbi S.A., a company based in the province of Santa Fe. 16

17 10. THE TEXTILE INDUSTRY IN ARGENTINA In the period, the textile value chain continued the expansion phase that began in 2002 with a stable production capacity throughout the period. During that time, the cumulative growth of the textile product sector, i.e., the first link of the chain, was 159%, while the textile clothing link grew 81%. Thus, the textile activity reached an average annual growth rate of 11% and 6.8% in the first and second segments, respectively. The increase of Argentine overall manufacturing industry remained at about 8.9% per year. While the final data for the current year is not available yet, this increasing trend would have shown new signs of a slowdown in 2012, with a drop of 1.4% in the physical production of textile products and 2% in clothing. Unlike the textile product sector, which decelerated just in 2012 after a strong reactivation in 2010 and 2011, the clothing sector has remained stagnated in the last five years. CHART N Evolu on of the Physical Volume Index for tex le products and clothing and the industry in general * Promedio industrial * Datos hasta el tercer trimestre Source: FADIT FITA based on INDEC data This strong increase in production came along with a significant recovery of employment, which grew 31.4% and 26.9% in the textile and clothing sectors, respectively, based on 2002 data. Today, it is one of the sectors that contribute the most to industrial employment, with over 300 thousand direct jobs. It is worth noting that one of the problems that need to be reduced and eliminated is the informal employment rate in the clothing sector. As a reflect of the slowdown in textile production growth, employment in 2012 would have declined by 1.3% and 5.6% in clothing based on official statistics available to date. This shows the difficulties that the sector has faced to continue creating new jobs over the past years that were available at the beginning of the decade, with a performance that is weaker than the industry in general. 17

18 CHART N Evolu on of the Rate of Workers Occupied in tex les and clothing and the industry in general * Promedio industrial Productos tex les * Datos hasta el tercer trimestre Source: FADIT FITA based on INDEC data. USE OF THE TEXTILE INDUSTRY INSTALLED CAPACITY Since 2002, based on the policies adopted by the National Government that allowed the economy and all sectors of the industry to return to a growth path, it is noted that the used capacity of the textile sector has exceeded the average use of the other industrial sectors almost every year. In 2012, the use of the sector s installed capacity was 79% above the industry s average (75%). On the other hand, the use of the installed capacity within this context remained relatively constant in the textile sector over the previous year. CHART N % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Installed Capacity Use Level Promedio industrial Productos tex les Source: FADIT FITA based on INDEC data 18

19 TEXTILE INDUSTRY INVESTMENT During the first years of the reactivation period (2003), investments remained flat due to the high percentage of idle capacity in the manufacturing activity. However, since 2004 there has been an upturn that, according to FADIT- FITA data, averaged US$ 147 million per year 1. In 2012, imports of textile equipment accounted for about US$ 169 million, which allowed supporting the level of investment in machinery and equipment despite the slower growth in the activity. However, it should be noted that imports of machinery drop 14% vis- à- vis the level of investments in 2011, a year in which the highest level of investments over the past decade was reached. CHART N Imports of tex le machinery Millones de U$S Source: FADIT FITA based on NOSIS data. INTERNATIONAL TRADE OF TEXTILE PRODUCTS IMPORTS Imports of Manufactured textiles 2 grew 475% from 2002 up to 2011 in terms of quantities, a year that recorded the highest level of imports of 269 thousand tons. This trend was only interrupted during the outbreak of the global economic- financial crisis in During 2012, the slowdown in domestic growth resulted in a 13% drop of textile imports in terms of quantities compared to As regard to the performance of the different segments, the main contraction in that year was seen downstream the chain, with a 31% decline in apparels and other clothing, the item that showed the highest growth of 427% over the past decade. A decrease by 12% in textile imports and 11% in other items 3 followed this drop in consumer products while yarns only declined by 7%. It should be noted that in terms of share, imports are still mostly concentrated within the 1 It should be noted that nearly all textile machinery are imported due to lack of local production. This allows an accurate estimate of the level of investment in machinery. 2 Manufactured textiles is the sum of all links of the value chain excluding raw materials: yarns, fabrics and consumer goods (apparels and clothing) (except jewelry). 3 Includes technical items, padding, felts, non- woven fabrics, coated and metallic yarns, cordage, carpets, velvets and embroidered lace, among others. 19

20 value chain inputs, where the share of textiles account for 34% of manufactured textile imports, yarns 29% and other items 24%. Evolu on and composi on of manufactured tex le imports Toneladas Prendas de ves r y otras confecciones Otros ar culos Tejidos Hilados Source: FADIT FITA based on INDEC data. Argentine textile and clothing value chain is particularly vulnerable to the entry of products that do not comply with trade regulations. Therefore, ongoing monitoring is required to protect domestic production from the entry of dumped products or produced by low- wage labor, as well as off- season items, among others. EXPORTS In relation to exports, as reported by FADIT- FITA, sales of manufactured textiles abroad have shown a strong 25% decline in 2012, in terms of quantities, which is even greater than that recorded in The drop was mainly in two segments, yarns (- 38%) and other items (- 17%). The only item that grew in 2012 was textiles, with an increase of 21% compared to the previous year. 20

21 Evolu on and composi on of manufactured tex le exports Toneladas Prendas de ves r y otras confecciones Otros ar culos Hilados Source: FADIT FITA based on INDEC data OUTLOOK The challenge faced by the sector as a whole is to increase productivity to achieve levels of competitiveness that will enable the value chain to increase market share both domestically and internationally and, at the same time create jobs in the production process. On the other hand, trade defense is one of the key policies to pursue within the context of predatory pricing worldwide and unfair competition. In addition, it is important to ensure supply of raw materials for local producers, as well as improvements and innovation in product quality and design, not only downstream but also upstream the value chain. 11. MAIN M.A.G & P., INTA AND PRIVATE SECTOR COTTON INITIATIVES a) Plan for Sustainable Development and Promotion of Cotton Production Among the actions undertaken by the Ministry of Agriculture, Livestock and Fisheries (MAGyP) linked to the development of the cotton value chain, the implementation of Law 26,060 is worth noting, which provided for the creation of the Plan for Sustainable Development and Promotion of Cotton Production. The instrument allows the development of actions to respond to both immediate situations and medium and long term strategic issues that affect cotton production in Argentina. The Plan comprises a Producer Income Compensation Fund designed to ensure the sustainability of cotton growing through mechanisms that will help alleviate the impact of sudden and negative price fluctuations by the establishment of revolving funds. The objective with this mechanism that is under an experimental stage is to encourage a horizon of certainty beyond the short term for producers. The Plan is complemented with the development of a Cotton Agriculture Insurance scheme that provides producers with a tool to 21

22 deal with sharp production shortfalls caused by weather, physical and biological adverse conditions that can affect the crop. In recent years, the Government has provided financing for about US$ 50,000,000 to the cotton provinces, which have developed a Proposal for Use of Funds that prioritizes the objective to increase the area planted to cotton through any of the following schemes: 1) Implementation of multi- risk insurance mechanisms or other types of insurance, under experimental stage in some provinces, in which their governments intervene to reduce the insurance cost by negotiating with the insurance companies. 2) Introduction of technological enhancements and improved crop management practices that lead to higher yields per hectare and reduction of phytosanitary risks (Technology Transition Support: innovation and implementation of best agricultural practices). b) Assistance Program for the Improvement of Cotton Lint Quality (PROCALGODON) The Assistance Program for the Improvement of Cotton Lint Quality, PROCALGODON, has been in effect since It was designed to improve the production and technological process of cotton in Argentina, from planting to the delivery of the baled lint to domestic and international markets, thus contributing to the added value of the product based on its quality and enhancing the competitiveness of the sector. The overall objective of this program is to rally volunteer support to create and consolidate a cotton lint quality system that will lead to enhance competitiveness in the sector by identifying the attributes that define the quality of Argentine cotton, establishing protocols for cultivation, harvesting and ginning and fostering the adoption of those protocols by producers and ginners. Thus, the necessary steps will be taken to create a lint quality certification system governed by commercial grades and HVI technological parameters, in addition to a system to monitor the quality of the lint consumed by the industry. Participation in this voluntary program will benefit the different players that make up the various links in the cotton chain by having the possibility of marketing their lint in batches of bales carrying the Certified Quality seal and a PROCALGODON identification mark. The activities began by drafting protocols for the different stages of cultivation, harvesting and ginning, as well as pilot tests that involve INTA s Agricultural and Livestock Experimental Stations, Cooperatives and small, medium and large groups of producers from the provinces of Chaco, Corrientes, Formosa, Santa Fe and Santiago del Estero. At the same time, audits of production processes were conducted, cotton production and ginning protocols published, and proposals developed to design software that will facilitate the traceability of bales and their subsequent marketing. Also, a communication program was outlined, surveys of existing ginning facilities and harvesters carried out, research lines proposed for the boll weevil, Anthonomus grandis, B., and trials conducted to analyze the effects on the quality of the lint from different cotton harvesters. 22

23 Also, surveys were conducted in 2010 and 2011 on Gin Mills of the Republic of Argentina and Cotton Harvesters, Module Builders and Transport Equipment in Argentina ; both were updated in 2011 and 2012, respectively. In the 2012 survey/update on harvester machines, it was noted that there are new cotton harvesters (PICKERS) in the country - Models 7760 (which produce rolls of raw cotton) and 7660 (with a larger hopper to deposit the cotton) that come with 5 or 6 raw cotton picker cylinders. Model 7760 can produce cotton rolls of 2 to 2.5 tons; Model 7660 can store 40 m3 of raw cotton in the hopper. Cosechadoras de algodón de recolección PICKER Provincia 2 Surcos 4 Surcos 5 Surcos 6 Surcos VRS TOTAL Chaco Sgo. del Estero Santa Fe Formosa Salta TOTAL The STRIPPER harvesting machines are produced in national workshops, and there are several models. The harvesting platforms currently available have a working width of 3, 5 and 6 meters. They can be mounted on and adjusted to PICKER machines with or without cleaners in some cases; they also can be mounted on tractors (on the front) or are manufactured with platforms that are dragged by tractors that also provide the power takeoff. In other cases, the harvesting platforms have built- in cleaning systems, such as the ARGENTO brand. Also, there are self- propelled STRIPPERS that are entirely manufactured in the country, in addition to the harvesting platforms. Cosechadoras de algodón de recolección STRIPPER Provincias Arrastre Plataformas Auto Propulsadas TOTAL Chaco Sgo. Del Estero Santa Fe Formosa Entre Rios Corrientes 6 6 Salta 0 S/Discriminar TOTAL According to the data collected in 2013, the number of both PICKER and STRIPPER harvesters has increased, but not significantly. As regard to the ginning sector, from the information indicated (page 24) the current distribution of ginners countrywide, based on their capacity, is as follows: 23

24 Argentina Provincia Desmotadoras por Rango de Capacidad Baja Media Alta Muy Alta TOTAL Chaco Sgo del Estero Santa Fe Formosa Corrientes Córdoba 1 1 Catamarca 1 1 Salta 1 1 San Luis 1 1 TOTAL During the first months of 2013, there have been no imports of ginning plants in the country. It is worth noting that there could still be imports of new or spare parts. A large number of ginning mills have made adjustments to gin cotton from STRIPPER harvesting. This means that the pre- cleaning and drying stages are installed on the equipment and machinery required for processing this harvested cotton. Also, some of these gins are equipped with other equipment necessary to enhance the performance of the process, such as module openers (needed for processing cotton packed into modules from the fields). This equipment is also useful to process raw cotton packed into rolls. Note that not all the listed gins operate in all seasons. Its operation is based on the area planted to cotton, crop yield, and economic capacity of the company, policies and other factors that should be considered for each case. In addition, the work titled "Assessment of the effect of cotton harvesting equipment on the quality of lint in high density crops" was published at the beginning of It provides the results of the work on a cash crop, 2011/12 season, in which one of the conclusions is that the use of stripper harvesters with pre- cleaning equipment has not significantly affected the lint technological parameters or properties as determined by HVI instruments, compared to picker harvesters. This work does not hamper research and new evaluations are anticipated. a) National Integration Cotton Project Continuing with the institutional strategy defined several years ago, the National Technology Institute for Agriculture and Livestock, INTA, approved the National Integration Project, Tools for innovation management in the Argentine cotton industry. This project is intended to coordinate institutional resources aimed at research, generation and/or validation, transfer and dissemination of technologies associated with breeding, plant protection, sustainable crop management and quality of Argentine cotton lint. Thus, the development of cotton production- related technologies customized to the various agro- ecological areas and predominant production systems of the cotton region in Argentina is expected. 24

25 Also, INTA s Cotton Project seeks to define and prioritize strategic proposals to improve the sustainability of Argentine cotton sector, together with the National Government, provincial governments, universities, other public institutions and private sector companies. The project includes research activities of 30 professionals from INTA in the Provinces of Chaco, Formosa, Santiago del Estero, Santa Fe and Corrientes, who interact, in turn, with agents of the different territories involved in the region. b) Phytosanitary Sustainability of Argentine Cotton Production As regard to health issues that have been affecting Argentine cotton in recent years, the Government efforts focused on reducing damages from the spread of the cotton boll weevil, Anthonomus grandis, B., have resulted in the consolidation of a technological package customized for small and medium producers: New challenges concentrate on disseminating these packages and maintaining boll weevil- free areas. Measures taken with regard to the industrialization close to production sites also benefit the health measures while lowering at the same time the value added cost of transfer. The development of strong local inclusion strategies will help ensure actions currently undertaken within the framework of the National Program for the Prevention and Eradication of the Cotton Boll Weevil, Anthonomus grandis, B, and support the fight against other pests that affect cotton production in the country. The consolidation of strategies that involve provincial and local Commissions more actively will certainly shorten the time frame and make the process more efficiently for Argentina to move ahead toward its recovery as a cotton producer. The FOUNDATION FOR THE FIGHT AGAINST THE COTTON BOLL WEEVIL (FULCPA, for its acronym in Spanish) is a private institution that works on reducing the pest in regions already affected and preventing the spread of the boll weevil toward areas not yet affected. The work is carried out jointly with other private and public institutions. There have been favorable results in some producing areas. c) Cotton, small- and medium- sized producers and Family Farming According to recent estimates, most of today s cotton producers in Argentina, albeit variations in some years based on planted area, are small- and medium- sized producers strongly involved in family farming. The characteristics of these producers are shortage of natural resources and capital, an average area between 2 and 5 ha, family labor and use of machinery contracted to a tillage service for soil preparation provincial governments provide part of this service through their technical agencies. 25

26 For many years, cotton production was the main income for most of these producers. In recent years, as a result of the gradual decline of cotton prices, production reached minimum levels without being there any other profitable productive alternatives for these families. It was evident in recent seasons that producers were interested in resuming cotton cultivation because of the recovery of relative prices of cotton, although the deterioration of their economic situation prevented them to a large extent to undertake farming on their own. Their major need is financing (reimbursable) for soil preparation and seed supply. The coordinated contribution of the National Government and its decentralized institutes (INTA and SENASA), together with provincial governments, makes it possible to solve some of those problems by developing and disseminating technologies suitable for smallholder systems aimed at the economic, social and environmental sustainability of cotton production. Also, in this regard and taking into account the spread and damages caused by the boll weevil, Anthonomus grandis, B., in the cotton year 2010/11, a technical and financial support was planned for these producers in the 2011/12 season. These technologies and actions allow small- and medium- sized producers to increase profitability and continue to be part of the production system of Argentina, thus evidencing the notion of social inclusion of Family Farming in cotton production. d) Cotton Agri- food and Agro- industrial Strategic Plan. Coordinated by the MAGyP, its mission is to promote and provide the development of the cotton sector as a whole integrated into a system within the framework of the stated sector s vision, for the benefit of producers, businessmen and workers involved in the production process and the entire Argentine society, as the ultimate beneficiary of a stronger growth and a sustained and sustainable development process /14 SEASON OUTLOOK For the 2012/13 season AN INCREASE of the area planted to cotton is FORECASTED with respect to the previous year, which may reach 470/520,000 ha, depending on the area planted to sunflower and soybean. If normal weather conditions prevail during crop planting, growing and harvesting, and the boll weevil pest, Anthonomus grandis, B., can be controlled from the beginning, a production of 200/225,000 tons of lint could be estimated. It is reaffirmed that the estimated area will depend on weather conditions for planting competitive crops (sunflower and soybean), as well as on price levels and a highly effective fight against the cotton boll weevil. From the above- mentioned area, 97-98% would be planted to INTA s transgenic varieties and the remaining area to conventional cultivars. As regard to the harvest, the introduction of additional stripper equipment with pre- cleaning system is expected, but maintaining the existing picker harvesters. Therefore, it is likely that ginning yield will increase as a result of higher volume per ton of raw cotton and less damage to 26

27 the cotton lint in relation to its commercial quality and spinning characteristics or parameters. This will benefit the textile industry. With respect to ginning, the existing idle capacity can generate increasing costs or that some plants may not operate. It is estimated that the increase of both the area planted to cotton and production of lint would increase exports and meet the demand of Argentine textile industry, except for a small percentage of lint that might need to be imported to meet the spinning characteristics and parameters for manufacturing certain yarn counts. Argentina, September