The conflict between cotton merchants and growers over the producer price of seed cotton requires sober minds to tackle the matter to achieve a win-win situation for all the parties. Ginners and growers need each other and, as such, should always strive for amicable ways of ending conflict. They need to engage in discussions that bring them benefits as they are all in business to make profit. No one is involved in charity and every investment must bring good returns that keep the business going.
If farmers fail to make profit, let alone break even, then surely alarm bells begin to ring and they have to look at the whole production matrix and not just commodity prices. The same goes for ginners. A lot has happened in the past few days with the Government adopting a hard-line stance, warning ginners of the consequences of ripping off growers and threatening it would be forced to buy cotton from growers if the ginners continue paying uneconomic producer prices.
On Monday, farmers then demonstrated against the ginners over the low cotton producer prices and made it clear they will withhold their crop until ginners start paying above US$1/kg.
While arguments from all the parties make a lot of business sense, we are not convinced the fight over prices can be resolved by staging a demonstration. We also do not believe the problems can be resolved by letting the Government buy a crop it did not finance, given that the bulk of the seed cotton crop is grown under contract.
The best way forward is not to engage in a war of words and threats but sit down as stakeholders and consider how best farmers can get a good price for their crop while at the same time taking into account the lint price trends on the international market.
It is not in dispute that the producer price is depended, among other things, on what happens on the world market. If the world lint price is bullish, it will have a positive effect on local producer prices and if it is bearish then it impacts negatively on producer prices.
Whether the world lint price is bullish or bearish depends on many factors, chief among them the lint stocks held by the world's leading producers. Market forces play a crucial role in terms of the supply and demand of lint on the international market.
Other leading seed cotton producers can afford to pay very high prices because they enjoy huge subsidies from their governments, which is not the case in Zimbabwe. Given such a scenario, it would be expecting too much for our ginners to compete with companies in such countries and pay at the same level.
However, this is not to say that growers do not have a point, but they should also understand the dynamics of the world lint market. The market can one day be firming and then crush the next day and this will obviously affect seed cotton pricing.
We hope the ginners are sincere in their analysis of the market in terms of the lint pricing trends and that they are not painting a gloomy picture just to rip off growers so that they enjoy huge profits.
It would be sad if Government starts buying cotton from farmers, as it would be against the spirit of the Statutory Instrument that forbids companies from buying a crop they did not finance.
We believe time has come for ginners and growers to review the cotton production methods as they relate to the yield levels. It is our conviction that the whole production matrix needs to be given serious attention to ensure that farmers get the right inputs to achieve high yields. With high yields, the commodity price becomes inconsequential as farmers can easily break even and make profit.