Maputo — The cotton company Plexus has postponed direct production of cotton this year in the northern Mozambican province of Cabo Delgado, because of the sharp fall in the world market price of cotton.
Plexus is a British Company which has concessions in Cabo Delgado and the neighbouring province of Nampula, and boasts that it is the largest cotton producer in Mozambique. The concessionary companies normally provide inputs for peasant cotton farmers, and then buy up the cotton they produce.
But this year, Plexus intended to branch out and farm its own cotton fields, in addition to buying peasant cotton. However, the price of cotton has collapsed. The price in September 2011was 116.65 US cents per pound, but the average spot price quoted on Friday was 71.39 cents a pound - a fall of almost 40 per cent in a year.
In May, after negotiations between the National Forum of Cotton Producers (FONPA), which represents cotton farmers, and the Mozambique Cotton Association (AAM), representing the companies that buy the cotton, the government fixed this year's minimum producer price for first grade raw cotton at 10.5 meticais (about 36 US cents) per kilo - almost a third lower than the 2011 price of 15 meticais a kilo.
The fall in the producer price has discouraged Plexus from cultivating its own cotton. According to Plexus manager Faustino Catingue "We had a project in hand for direct cotton production which we should have implemented in the present campaign, but we are delaying it for a future opportunity because of the fall in the cotton price".
Cited in the Beira daily paper "Diario de Mocambique", Catingue said that, since last year's price had been "encouraging", Plexus drew up a project to grow cotton on fields that had once been run by the defunct company Lomaco (Lonrho-Mozambique Agricultural Company), in Montepuez district.
"Currently Plexus is not undertaking direct production, we are just encouraging production in the peasant family sector", he added. "Last year, we were motivated, and we wanted to open cotton fields along industrial lines, but we delayed this when the price of raw cotton fell on the international market".
He argued that direct production involves high costs, which can only be recouped through a higher price for the cotton. He pledged that, while direct production is not possible, Plexus will continue to buy the cotton produced by the peasant farmers.
Plexus is working with farmers from 750 villages in Montepuez, Namuno, Balama, Ancuabe and Chiure districts in Cabo Delgado, and Namapa district in Nampula. The company provides the farmers with seeds, and Plexus extensionists assist them in all aspects of production. At the end of the harvest, Plexus pledges to buy all the cotton the farmers have produced. In the last campaign, Plexus bought 24,000 tonnes of raw cotton from farmers at the price of 15 meticais a kilo.
Despite the fall in the producer price, Catingue expects the farmers in the current campaign to sell around 32,000 tonnes of cotton to Plexus, which will be processed in the company's two ginning mills.