The Global Natural Fibre Economy

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The Global Natural Fibre Economy

• trends, issues and challenges

Adam Prakash Secretary Intergovernmental Groups
on Hard Fibres and on Jute, Kenaf and Allied
Fibres Trade and Markets Division (ESTM) FAO of
the United Nations
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Outline

• Economic importance of natural fibres
• Trends in global production and trade
• Why policies matter
• Synthetic versus natural fibres
• Expanding and diversifying markets
• International action plan

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Economic importance of natural fibres

• Natural fibres sector, worth over US40 billion
  annually to the worlds producers
• Majority of whom are situated in developing
  countries
• Cultivated as a cash crop, the sector generates
  as much as US20 billion in export revenues

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Economic importance of natural fibres

• In Asia, cotton is small holder crop and a major
  source of income of some 100 million rural
  households
• In Sub-Saharan Africa, cotton grown on 2 million
  small farms. 10 million people work in the
  region's cotton sector, and raw cotton makes up
  about 50 of exports from Benin, Burkina Faso,
  Chad, Mali and Togo

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Economic importance of natural fibres

• In India and Bangladesh, 4 million marginal
  farmers earn their living and support 20
  million dependents from the cultivation of jute
• About 1 million workers are employed in the silk
  sector in China. Sericulture provides income for
  700 000 households in India, and 20 000 weaving
  families in Thailand
• Sisal is important to rural poor communities of
  30 million people in Brazil

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Outline

• Economic importance of natural fibres
• Trends in global production and trade
• Why policies matter
• Synthetic versus natural fibres
• Expanding and diversifying markets
• International action plan

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Production Trends

• steady growth in global natural fibre output...

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Production Trends

• ...but masks contrasting production trends among
  the different fibres

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Production Zones
Cotton
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Production Zones
Sisal
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Production Zones
Jute
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Production Zones
Coir
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Production Zones
Abaca and Ramie
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Production Zones
Flax and Hemp
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Production Zones
Silk
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Trends in Trade

• volatile growth around a steady trend in global
  natural fibre exports mirroring trend in
  production...

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Trends in Trade

• ... but again divergent paths among the
  individual fibres

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Trends in Trade

• Share of export revenue falling for developing
  countries export earnings are characterised by
  marked volatility. In recent years industrialised
  countries have witnessed much higher growth in
  revenues than developing countries

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Outline

• Economic importance of natural fibres
• Trends in global production and trade
• Why policies matter
• Synthetic versus natural fibres
• Expanding and diversifying markets
• International action plan

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Policies matter
WTO aims to establish a fair and
market-oriented agricultural trading system...
through substantial progressive reductions in
agricultural support and protection.

• ...but, natural fibre sectors have had a long
  legacy of targeted policy intervention, and this
  is continuing today

• Some of the largest agricultural exporters
  competed on the basis their governments ability
  to subsidise production and exports while
  limiting access to their markets for products
  from lower-cost suppliers
• Fibre producers in the vast majority of
  developing countries, are forced to compete with
  the treasuries of the worlds richest countries
  in export markets and in their home markets

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Policies matter

• Widely accepted the subsidies maintain cotton
  production at otherwise unprofitable levels in
  industrialized countries
• Current levels of EU production could be imported
  at one-third of the cost of production

• In the US, the cost of cotton subsidies in some
  years is greater than the total value of exports
• Up to 70 of US cotton production is exported
  (40 of world exports versus 17 in 1970).
  Excess supplies induced by subsidies depress
  world market prices
• While good news for consumers, cotton subsidies
  thwart efforts in developing countries with a
  natural advantage in cotton to supply the world
  on a level playing field. Foregone employment and
  export revenues, and the associated multiplier
  effects, run into billions of dollars.

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Policies matter

• Market access is also a contentious issue. Ad
  valorem and specific import tariffs are
  extensively employed to protect domestic fibre
  markets and so to are quotas

• Natural fibres present themselves as a classic
  example of the tariff escalation controversy
  where importing countries protect processing
  industries by levying lower tariff rates on raw
  material imports and higher duties on processed
  products.
• Tariff escalation can therefore keep countries
  trapped as raw material providers by preventing
  them from diversifying their export base.

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Outline

• Economic importance of natural fibres
• Trends in global production and trade
• Why policies matter
• Synthetic versus natural fibres
• Expanding and diversifying markets
• International action plan

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Synthetic versus Natural Fibres

• Global fibre end-use has risen 2.5 fold in the
  last 40 yrs. But the evolution of natural and
  synthetic demand has been markedly different
  Synthetic fibre utilisation tripled while natural
  fibre demand a moderate 70 increase

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Synthetic versus Natural Fibres

• Derived from fossil fuels, numerous synthetic
  fibres have particular characteristics that are
  unmatched by natural fibres
• Synthetic fibres are almost always mass-produced,
  giving rise to economies of scale which ordinary
  farmers cannot possibly achieve even through
  mechanised agricultural cultivation practices

• Difficult to match the power of the multinational
  petro-chemical firms in marketing
• Fierce competition for agricultural land and
  resources by food and bio-fuel sectors has led to
  marginalization of fibre crops

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Synthetic versus Natural Fibres

• The demand for natural fibres is also sensitive
  to changes in own prices, the prices of competing
  natural fibres and of course synthetic
  substitutes
• But income is by far the most important
  stimulant. Studies show that for every 1 fall
  (rise) in income, fibre demand contracts
  (expands) between 1 to 2
• Responsiveness is much higher than for many other
  commodities, including food, other raw materials
  and energy

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Synthetic versus Natural Fibres

• The physiology of the fibre and its cost become
  more important issues, opening natural fibres to
  a multitude of other competitive forces.

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Synthetic versus Natural Fibres

• Many believed that competition from synthetics
  would erode the market for natural fibres in to
  insignificance.
• The blending of natural fibres with synthetic
  counterparts, has boosted natural fibre demand
• Synthetics are cheaper to produce, but evidence
  of a strong perception by consumers that certain
  products are superior if they are made with
  natural fibres and are willing to pay a premium
• Issues relating to sustainability and the
  environment have opened natural fibres to wide
  array of other applications

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Expanding and diversifying markets
Traditional Market Paradigm for Natural Fibres
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Expanding and diversifying markets
New Market Paradigm for Natural Fibres
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Expanding and diversifying markets

• As a renewable resource, natural fibres can play
  a key role in the emerging green economy
• One tonne of polypropylene emits into the
  atmosphere more than 3 tonnes of carbon dioxide,
  the main greenhouse gas responsible for global
  warming
• While one tonne of jute fibre requires 10 of the
  energy used for the production of one tonne of
  synthetic fibres

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Expanding and diversifying markets

• While processing of some natural fibres can lead
  to high levels of water pollutants, but they
  consist mostly of biodegradable compounds, in
  contrast to the persistent chemicals, including
  heavy metals, released in the effluent from
  synthetic fibre processing

• in the case of high-density polyethylene, 3
  tonnes of carbon dioxide emissions for every
  tonne of material burnt

• In contrast, a tonne of natural fibre like jute,
  can absorb well over 2 tonnes of carbon, and, at
  the end of their life cycle, they are 100
  biodegradable

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Outline

• Economic importance of natural fibres
• Trends in global production and trade
• Why policies matter
• Synthetic versus natural fibres
• Expanding and diversifying markets
• International action plan

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International Action Plan

• Environmental considerations are increasingly
  influencing consumption patterns in industrial
  sectors and Governments throughout the world are
  taking measures to discourage industry from
  placing external costs on the community
• Therefore, if the life-cycle costs associated
  with synthetic fibres were internalised, by way
  of a tax, natural fibres would undoubtedly attain
  a greater cost advantage over synthetic products
• Remove policy distortions
• Launching a Fibre Mark to promote sustainable,
  pro-environment and responsible choices in the
  market place

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International Action Plan
Joint Meeting of the 35th Session of the
Intergovernmental Group on Hard Fibres and the
37th Session of the Intergovernmental Group on
Jute, Kenaf and Allied Fibres Pasay City,
Philippines, 20/10/2009 - 22/10/2009