As concerns continue growing over cotton price for this season, Government may come up with a subsidy to cushion the merchants and encourage farmers to continue planting, a senior official has said.
Agricultural and Marketing Authority (AMA) chief executive Mr Clever Isaya, said yesterday that the Government would maintain the $85 (about US$1) price per kilogramme and come up with a subsidy.
Analysts, however, were quick to point out that the subsidy would come as "an extra huge burden" to the Government already struggling to clear last season's outstanding payments amounting to $1,5 billion.
"The Ministry (of Lands, Agriculture, Fisheries, Water and Rural Resettlement, is looking into that in terms of coming up with a subsidy," Mr Isaya told The Herald Finance & Business in an interview. Government is already providing subsidy in the form of free inputs.
As for outstanding payments, he said: "Whatever is outstanding will be cleared before the onset of the (next) marketing season."
There are growing concerns that the price, which is way above global price of lint (fibre) could throw several merchants out of business if the exchange rate remains stable.
Cotton firms also indicated they might not afford the price, which is way above the average US40 cents in the region, arguing it would difficult to mobilize finance facilities to pay farmers.
"At that price, no bank will be willing to finance a loss," said one official with a local cotton company.
Zimbabwe is expecting better cotton yields this season on the back of good rains. But the crop in some areas was severely destroyed by excessive rains.
"The first leg of the season (planting) was fairly good and yields will generally be good." It is, however, our hope that the issue of price is addressed to avoid any problems to the Government, farmers and ginners during the marketing season," said an official with another local cotton company.
"There is a problem in raising expectations of the farmer and fail to deliver. This will be a total disaster to the industry already making a good recovery."
The cotton selling season normally begins in April and ends in September.
The bulk of Zimbabwe's processed cotton is exported and prices are determined on the international markets.
At $85 per kg, the price comes to about US$1 per kg, at the current exchange rate, against revenue of about US$0,72c for both ginned seed and lint extracted from a kilogramme of raw cotton.