6 February 2013

Zimbabwe: Bleak Selling Season Awaits Cotton Farmers

THE cotton market endured a poor 2012 season, making the fibre one of the worst performers among all agricultural commodities produced in the country, with a producer price of US$0,30 per kilogramme compared to tobacco which averaged US$3,76 per kilogramme last year.

However, there is no respite in 2013 for the smallholder cotton producers who plough the cracked dry fields of Gokwe, Chipinge, Mt Darwin, Rushinga, Checheche and Chiredzi with the hope of improving their livelihoods with proceeds from cotton.

For the second year running, cotton economists predict a decline in international cotton prices which, according to the Cotlook A Index, stands at US$0,89 per pound, due to overstocking and lower global mill demand during the last cotton season.

Forecasts for quarter-average price from New York front futures show an average of US$0,77 per pound in 2013.

The volatility of the market saw prices declining from US$2,37 per pound in March 2011 to US$1 in 2012.The main source of uncertainty in the cotton market today is the future of Chinese policy toward the reserve cotton, including how reserve cotton will be handled.

Since the world cotton market is volatile, timely knowledge of these changes is vital to all stakeholders in the cotton sector to enable them to strategise for a win-win situation for buyers and farmers.

For the 2013 cotton marketing season, there are already signs that a repeat of last year is most likely to happen since domestic cotton prices have followed the global price decline trend leading to fierce clashes between farmers and buyers.

Despite government sympathy to the plight of those smallholder farmers affected by the significant drop in prices for last season's crop, it was a bad season for the cotton industry as contractors were trying to break even as a result of the huge fall in world prices.

Agricultural economist, Midway Bhunu, urged all stakeholders in the cotton sector to protect the farmer "at all costs" since farmers have the ability to build or completely destroy the cotton sector, if they stop production of the crop.

"Before the marketing season, all stakeholders need to discuss the way forward if the international price continues to decline and, despite the declining prices, the farmer needs to benefit in terms of good pricing; the farmers also needs to be protected and they should be given incentives to allow them to go back to the fields and produce cotton," Bhunu said.

"The low prices are a disincentive to producers but in the short term, players in the industry need to come up with better strategies to deal with the declining prices instead of taking advantage of the low international prices to rip-off farmers," he added.

With the marketing season fast approaching, a few big unknowns hang over the heads of the nation's cotton producers, who grudgingly planted the crop with the hope of getting a better price in 2013.

Cotton has had its fair share of ups and downs over the years, especially in the past decade with production tumbling to 195 000 tonnes and 198 000 tonnes in the 2007/08 season from an all time high of 353 000 tonnes in 2000. Regardless of an increase in production to 340 000 tonnes in 2012, government has already predicted a dip in production to 280 000 tonnes, owing to a decline in international prices, which have fallen by at least 50 percent since 2011.

Therefore, to survive, the local producer will have to improve yields and quality as a way of enhancing viability, with countries such as India having become more competitive through the use of biotechnology and the provision of minimum support prices to farmers.

"When the prices on the world market were at US$1 per pound, ginners bought the crop for less than US$0,50 per kilogramme meaning we need to look for a short term solution to counter the factors that are affecting pricing," said Bhunu.

Since domestic prices are strongly influenced by the global markets, Bhunu called on players to be transparent and allow discussions with farmers and government to try and curb the already dwindling hectarage under cotton.

The cotton crop which has been very critical in the development sustainable rural livelihoods Zimbabwe is fast losing its glitter as the white gold is failing to improve the livelihoods of smallholder farmers as they bear both the production and marketing risks associated with cotton production.

Last year, government intervened in the cotton industry and gazetted Statutory Instrument 106 A of 2012 that makes cotton a controlled product. The Statutory Instrument gives the Minister of Agriculture, Mechanisation and Irrigation Development the power to fix cotton prices.

The Statutory Instrument has created uncertainty among contractors who fund the crop with a high possibility of them failing to recover their costs if prices are fixed beyond the prevailing market trends.

Cotton is the country's second largest agricultural foreign currency earner after tobacco, earning US$ 200 million in 2011; the labour intensive crop is under threat as buyers fail to provide a sustainable price to farmers.

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