Viability of the Raw Cotton Production in Spain After the Decoupling of the Subsidies

Considering the latest reform of the EU's Cotton Regulation of 29th April 2004, which will come into force in the 2006/07 season, we analyse its impact on the cotton production sector of Andalusia. The decoupling of subsidies implies that producers will be entitled to 65 percent of the amount received in the reference period (three years) irrespective of the crop chosen to grow. The remaining 35 percent (slightly higher) is paid as cotton are a payment. In this research, first from a survey carried out in 2004 we obtained six groups of producers using fact or analysis and cluster analysis. Then, based on this characterization, we assess the impact of two policy scenarios: (a) the implementation of the reform without any additional measures, and (b) the addition of a complementary environmentally based area payment plus the modulation of the decoupled subsidy up to 50 percent according to raw cotton quality. In the first scenario most producers would reduce the use of inputs to a minimum and leave the raw cotton in the fields. In the second scenario the production of cotton would shift from conventional toward Integrated Production with a reduction of 30% with respect to the current hectarage.

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