VZCZCXRO9610
RR RUEHMA RUEHPA
DE RUEHOU #0596/01 1851716
ZNR UUUUU ZZH
R 031716Z JUL 08
FM AMEMBASSY OUAGADOUGOU
TO RUEHC/SECSTATE WASHDC 3894
INFO RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 0055
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZK/ECOWAS COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE WASHINGTON DC

UNCLAS SECTION 01 OF 02 OUAGADOUGOU 000596 
 
SIPDIS 
 
AF/W FOR EMILY PLUMB, JASON HUTCHISON 
ACCRA FOR USAID 
USTR FOR LAURIE-AGAMA 
DAKAR ALSO FOR FAS AND FCS 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR ECON EAID EFIN PREL UV
SUBJECT: BURKINA FASO SEEKS TO WIN BACK TITLE AS AFRICA'S TOP COTTON 
PRODUCER 
 
OUAGADOUGO 00000596  001.2 OF 002 
 
 
Reftels:  A) OUAGADOUGOU 0692; B) OUAGADOUGOU 0488; 
          C) OUAGADOUGOU 0234 
 
¶1. Summary: During the 2007/2008 growing season, drought and 
localized flooding, coupled with a softening of world cotton prices, 
led to widespread dissatisfaction among cotton farmers and the 
subsequent defection of many producers to cereal production.  To 
encourage cotton production, farmers are being offered increased 
producer prices and more than $15 million in seed and fertilizer 
subsidies, along with financial support from the newly created 
"Fonds de Lissage." 
 
¶2.  The GOBF hopes that this year's cotton crop will almost double 
to over 600,000 tons.  This figure will be augmented by Sofitex's 
plans to sow 15,000 ha with pest-resistant biotechnology (Bt) cotton 
from Monsanto, a U.S. company.  End Summary. 
 
¶3. Cotton, which contributes 75 percent of foreign exchange 
earnings, is crucial to Burkina Faso's economy.  The 2007/2008 
growing season was marked by poor rainfall punctuated by significant 
flooding in certain regions.  These poor growing conditions coupled 
with depressed world cotton prices led to a 45-percent decline in 
production (360,000 tons for three cotton companies, Faso Cotton, 
Socoma, and Sofitex in lieu of the 500,000 tons produced in 
2006/2007).  Consequently, farmers in some areas of the country 
decided to forgo cotton cultivation in favor of more lucrative 
cereal crops. 
 
¶4. Despite last year's difficulties, cotton parastatal Sofitex, the 
flagship of the Burkinabe economy, is hoping to breathe new life 
into the nation's troubled cotton industry through a publicity 
campaign and a series of monetary incentives that it hopes will 
encourage increased cotton cultivation. 
 
¶5. Government and parastatal optimism appears to ignore the 
escalating level of debt experienced by all three cotton companies, 
which has forced them into drastic recapitalization schemes.  It is 
unclear at this point if these schemes will be successful in 
stabilizing the troubled cotton sector. 
 
------------------------------------------- 
Cotton Parastatal, Ag Minister 
Paint a Rosy Picture for 2008/2009 Campaign 
------------------------------------------- 
 
¶6.  As a prelude to the 2008/2009 cotton season, Burkina Faso's 
three cotton producers Sofitex, Faso Coton, and Socoma, held a Forum 
on April 17-26 with the National Cotton Producers Union of Burkina 
Faso (UNPCB) to discuss the future of the nation's cotton industry. 
The day before, Sofitex's Director General, Celestin Tiendrebeogo, 
told the press that, despite the 45-percent decrease in production 
during the 2007/2008 season, he remained optimistic and believed 
that production in excess of 600,000 tons was achievable for the 
upcoming growing season. 
 
¶7. During his April 16 meeting with the press, Tiendrebeogo stated 
that cotton production was still profitable and he was convinced 
that Burkina Faso could once again become known as "Africa's largest 
cotton producer."  He added that despite last year's unfavorable 
harvest, Sofitex earned a 10 percent profit margin that allowed it 
to pay an additional 10 CFA (USD 0.02) to local farmers, bringing 
the 2007/2008 producer price from 145 CFA (USD 0.34) to 155 CFA (USD 
0.37) per kilo for Grade One cotton.  For the 2008/2009 season, the 
producer price is set at 165 CFA (USD 0.39) per kilo for Grade One 
and 140 CFA (USD 0.33) for Grade Two cotton.  Sofitex has also 
committed to pay an additional 15 CFA (USD 0.035) per kilo if the 
production goal of 650,000 tons is achieved. 
 
¶8. In addition to price increases for the 2008/2009 season, the GOBF 
has offered other incentives to rekindle farmers' interest in the 
cotton sector. The GOBF has given approximately $15.5 million in 
subsidies for improved seed and fertilizer.  As a result, farmers 
will see a decline in input prices, from approximately $47 to $29 
for nitrogen-phosphorus-potassium (NPK) fertilizer, and $31 for 
urea, a low cost nitrogen fertilizer.  The Government has also 
activated the newly created safety net, the "Fonds de Lissage" which 
allowed Sofitex to pay producer bonuses.  Funded with (USD 
23,251,746) from the French Development Agency (AFD), this newly 
created fund was designed to diminish the risks associated with 
volatile world cotton prices and help the cotton industry respond to 
changing world market conditions.  It is hoped that this fund will 
allow the cotton sector to remain unscathed through repeated periods 
of price decline, while maintaining producer profitability. 
 
OUAGADOUGO 00000596  002.2 OF 002 
 
 
 
¶9. During the May 30 opening of the 2008/2009 agricultural campaign, 
Laurent Sedego, the recently appointed Minister of Agriculture, 
Water Resources and Fishery, echoed Tiendrebeogo's optimism that the 
previous year's production of 310,000 tons would more than double to 
621,605 tons during the 2008/2009 season.  Sedego reasoned that an 
increase in world cotton prices, government subsidized farmer 
inputs, and the "Fonds de Lissage" would give the cotton sector "the 
shot in the arm it would need to boost 2008/2009 production to 
record levels." 
 
-------------------------------------------- 
Despite Optimism the Reality of Debt Remains 
-------------------------------------------- 
 
¶10.  Despite displays of optimism, all three companies face serious 
deficits that could jeopardize additional producer bonuses.  In 
2007, Sofitex reported losses of approximately $29.52 million.  This 
debt forced Sofitex into an $82 million recapitalization, which 
brought initial capital levels to approximately $92.4 million.  The 
recapitalization was funded by the GOBF, which took over shares from 
the French-owned Dagris and refinanced those owned by UNPCB.  The 
GOBF has promised to identify a buyer for the Dagris shares by the 
end of 2008. A pool of banks has agreed to reschedule Sofitex's 
$104.8 million debt for the 2004/2005 and 2005/2006 harvests for a 
period of five years.  For the 2007/2008 cotton season, Sofitex 
borrowed $103.8 million from an off-shore pool of banks and $142.8 
million from local banks to buy improved seed and fertilizer. 
Sofitex is currently in negotiations with local banks to obtain 
funding for fertilizers to be used during the 2008/2009 season. 
Despite a forecasted harvest of 600,000 tons for 2008/2009, Sofitex 
still expects a loss of approximately $4 million. 
 
----------------------------------- 
Monsanto Bt Cotton Hung by a Thread 
----------------------------------- 
 
¶11. In an attempt to further increase production, UNPCB has been 
working closely with the U.S. company, Monsanto, to finalize plans 
that would place 15,000 ha of Bt cotton into commercial production. 
After five years of field and laboratory testing, Monsanto and UNPCB 
has signed a licensing agreement that allows Sofitex to grow 
Bollgard II, pest-resistant, transgenic cotton. 
 
¶12. On March 17 the GOBF issued an administrative order detailing 
the requirements for the importation and production of transgenic 
cotton seed varieties. At the last minute, Monsanto announced that 
it would delay commercialization of genetically modified cotton 
seeds in Burkina Faso because the order contained conditions that 
were unfavorable to the development of transgenic technology. 
 
¶13. In an April 30 letter to Salifou Sawadogo, Burkinabe Minister of 
the Environment, Monsanto wrote that it would be unable to initiate 
production of transgenic cotton seed for the 2008/2009 season unless 
four articles in the current administrative order were revised. 
Monsanto asserted that the proposed one-year authorization in the 
Order was not realistic and requested a five-year window that would 
allow the parties to more effectively plan for future growing 
seasons.  Monsanto also stated that 12 years of nutritional and 
toxicity analyses had provided ample scientific evidence that Bt 
cotton was safe for both consumers and the environment, and objected 
to the excessive liability requirements demanded by this agreement. 
 
¶14. Upon hearing the news of a possible halt to the planned 
commercialization of the Bt cotton in Burkina Faso, Ambassador 
discussed the issues with both Prime Minister Tertius Zongo and 
Monsanto reps.  The PM then interceded and instructed that the 
administrative order be changed to meet Monsanto's terms.  At the 
June 16 Council of Ministers meeting, the GOBF authorized Sofitex 
and the agricultural research institute, Institut de l'Environnement 
et de Recherches Agricoles (INERA), to sign a license agreement with 
Monsanto for import, production and marketing of transgenic cotton 
seed varieties Bollgard II.  The forecasted 15,000 ha are now 
scheduled for planting with Monsanto's Bollgard II. 
 
JACKSON