Maravi

(HERALD) Government, cotton farmers deadlocked

Government, cotton farmers deadlocked
Thursday, 31 May 2012 00:00
Martin Kadzere Senior Business Reporter

GOVERNMENT is on a collision course with cotton ginners after it announced it had nationalised this year’s crop. Agriculture, Mechanisation and Irrigation Development Minister Joseph Made said on

Tuesday Government would become the sole buyer of cotton in light of the price deadlock between farmers and ginners. This is despite the fact that the bulk of the crop was financed by the ginners at a cost of about US$42 million under contract farming.

Last Tuesday, farmers and ginners had agreed on a minimum price ranging between US28c a kilogramme for the lowest grade and US38c for the highest grade. Government would then pay a subsidy of US16c per kg from every grade, bringing the minimum price to US44c for the lowest and US54c for the highest grade.

“Stakeholders shall reconvene to review the prices in line with the conditions from time to time,” read part of Tuesday’s meeting resolution.

But the prices were subject to the approval by the Government.

Later, Minister Made said Government would not give a subsidy but would, instead, source funds through the Youth Ministry to buy the cotton.

“Farmers should start harvesting cotton and keep it until Government starts buying. The prices will be unveiled soon,” said Minister Made.

Economic analysts said the Government’s move would have adverse effects on the viability of the sector, which has been on a steady recovery.

“It is not the best way forward because if we look back,” said a Harare economist Mr Brains Muchemwa yesterday. “Government has never been efficient in terms of its pricing mechanisms.

“In addition, the same Government does not have the capacity to buy cotton and this will discourage growth and future investment into the sector.”

BancABC economist Mr James Wade said yesterday Government should intervene through paying a subsidy to farmers

“Government should consider coming up with a subsidy to cushion farmers because we cannot run away from the reality that prices on the international market are falling,” he said.

“By controlling the cotton prices . . . we are kind of moving backwards where we had payment delays particularly to maize farmers.”

Globally, cotton farmers experience similar challenges with producer prices. But some countries, such as the US have managed to keep their farmers in production by providing subsidies.

China also subsidises producers to keep them motivated to grow cotton.
Countries such as India have become more competitive through the use of biotechnology. In addition, they also provide minimum support prices.

On May 9, the Agriculture Marketing Authority had set minimum prices from between US36c for the lowest grade and US50c for the highest grade.

Since then, international prices have fallen by almost 12 percent. The New York Futures for July have declined 11,3 percent from US85,82c per pound to US74,52c.

Futures for December are down by 11,8 percent from US71,7c. The New York Futures give an indication of the price levels that can be expected at a future date and contract sales can be made using the futures market indications.

Labels: COTTON

posted by MrK @ 2:36 PM