Zimbabwe's cotton industry continues to wade in uncertainty amid indications that many farmers are abandoning the crop in protest over poor prices and alleged unfair contractual practices by ginners.
The Cotton Producers and Marketers Association of Zimbabwe recently reported that only 20 percent of the traditional growers of the crop in Masvingo province have grown it this year, while 40 percent have done so in Manicaland with Midlands and Mashonaland Central provinces retaining 50 percent and 40 percent of their farmers respectively.
CPMAZ said farmers in the Lowveld had switched to sorghum while those in Masvingo and Mutoko were experimenting with tobacco. The association added that in the Midlands farmers were still searching for another alternative crop besides maize to which they have turned in the interim.
It is normal for farmers to react that way. They are in business and they need to produce crops that leave them economically empowered and not vice-versa.
Some have however stuck to their guns and grown the crop though under different circumstances. And while some have gone back to their traditional contractors, some have taken advantage of the inputs from the Presidential Well-wishers Input Scheme to produce free cotton, which they hope to sell to buyers of their choice.
All the farmers - contracted and non-contracted - are hoping for better prices this time around and from the snap surveys this writer conducted, they will not be releasing their cotton unless there are better prices than those offered last season.
And they are right. They need good prices to remain in business yet they do not seem to understand developments on the international scene that later determine the prices ginners offer when they buy the white gold.
Last season, merchants offered a maximum of US$0,30 while farmers wanted a producer price of at least US$0,75 per kilogramme. They felt such a price would at least bring them closer to achieving parity given the high costs of production.
But the farmers need to keep track of the goings-on on the international cotton markets in terms of prices and other essentially determinant factors such as supply and demand as well as the stocks on the markets to understand some of the pricing structures.
They need to know what makes merchants and ginners behave the way they do and most importantly, set the prices they offer. Sometimes ginners too, do not have much choice but set the infamous prices to remain in business as part of the global market.
Just recently, the International Cotton Advisory Committee Secretariat projected that global cotton production will decrease by 11 percent to 23, 2 million tonnes (106, 56 million bales) in 2013 to 14 due to lower cotton prices and increased attractiveness of competing crops.
This would be the second consecutive season of decline in cotton production and the smallest output in four years. Production is expected to fall sharply in the United States and Turkey, where competition with grains and soya beans is strong.
Smaller crops are also projected in China, Pakistan, Central Asia and the former French colonial portion of Africa. Production is forecast only slightly down in India, assuming a recovery in the average yield.
Global cotton mill use is, however, expected to continue growing slowly in the 2013/14 season on the basis of a continued gradual recovery in global economic growth. The Secretariat forecasts global cotton mill use to rise by 3 percent to 24, 2 million tons (111, 15 million bales), driven largely by South Asia.
World cotton trade could remain almost stable at 7,8 million tons (35,83 million bales), as a projected further drop in Chinese imports could be offset by increased demand from the rest of the world.
United States growers are not the only ones expected to reduce cotton acreage in 2013, the ICAC has also reported.
The ICAC further warned that after three consecutive years of increase, global stocks could contract by 6 percent from the record level of 16,6 million tons (76,24 million bales) forecast in July 2013 to 15,6 million tons (71,65 million bales) in July 2014. Most of this reduction in stocks is expected to take place outside of China.
"One major source of uncertainty regarding short-term global cotton supply and use projections stems from Chinese policies. The Chinese government has accumulated a national reserve of over 7 million tons (32, 15 million bales) in the last 14 months by buying domestic and foreign cotton.
"This national reserve will likely continue growing until the end of March 2013 but it is not clear how it will be managed after that point. International cotton prices are currently supported and stabilised by Chinese policies, but changes to these policies could have opposite results," the ICAC said.
Chinese state cotton reserves are however expected to rise to a record 8, 6 million tonnes by the end of the 2012/2013 cotton stockpiling programme in March.
In a bid to ease prices and increase supplies, the top planning agency, the National Development and Reform Commission said in a statement dated December 28, 2012, that it would sell an unspecified amount of cotton from its reserve but gave no further details.
China began its cotton stockpiling programme in 2011 to support local farmers. The government buys cotton at a premium to market prices, a policy which has sucked supplies out of the domestic market and forced textile mills to rely on imports.
But the Asian giant's stockpiling of cotton can easily hamper the fragile industry's recovery and distorting global prices.
The cotton chief of global trader Louis Dreyfus Commodities in San Francisco, recently took aim at the largest buyer of raw cotton blaming its aggressive stockpiling for causing price distortions harmful to the industry.
Joe Nicosia, head of the world's biggest cotton merchant, told hundreds of US growers at the Cotton Belt wide conference that end user demand would not rebound unless prices fall to make it competitive with polyester. That will only happen when Beijing stops soaking up the world's surplus fibre, he said.
The longer China holds on to its policy, the worse and direr the situation will become, said Nicosia, executive vice president and global head of cotton at the commodity trader.
Beijing's hoarding of cotton effectively keeps half the world's inventory off the market, as the industry struggles to repair damage from the wild prices of the past four years.
After a two-year buying spree as part of a government-backed programme to support its farmers by paying premium prices for home grown fibre, Beijing's strategic reserve will have accumulated an estimated 40 million bales of cotton by the end of March.
While Beijing is preparing to deal with the problem by selling some stock and issuing fresh import licences for its mills, it is unlikely to remove the overhang any time soon.
Nicosia said it could take until 2014 or 2015, before the surplus was eroded and market returned to balance.
There's no danger China will dump it on the marketplace, but it will hold it for a while and it will be a wet blanket over the market for quite a while, Nicosia said.
With the market now facing a record surplus of just under 80 million bales in the 2012/13 season and consumption down a fifth from its 2005/06 peak at 123 million bales due to those events, Nicosia believes prices should be in the 50 cents range.
But futures prices are propped up at levels he considered unjustified because half the world's inventory was held in Beijing and the state reserve typically stepped in to snap up fibre for its stockpile as soon as prices gravitate towards 70 cents, he said.
That price is considered cheap by the state because it is almost half it pays its farmers for their crops. As their interest sends prices towards 80 cents, they then back off.
As long as China is soaking up supply, we'll be prone to oversupply and unable to find a balance, he said.