Cotton farmers sing the blues
IT has become the norm each year for cotton farmers and merchant to engage in bitter pricing disputes that have contributed to the demise of a once vibrant sector.
For decades, cotton has been a major success story for Zimbabwe, supporting livelihoods for thousands of smallholder farmers.
In fact, the white gold – as cotton is popularly known – had become the main source of income for people in arid regions where it does not make economic sense to produce the staple grains.
But not anymore!
Declining international prices of cotton against the backdrop of high input costs are threatening the survival of farmers.
For nearly a decade now, there has been endless bickering between farmers and buyers over poor prices.
Farmers argue that the prices are way below what is adequate to enable them to breakeven.
For the majority of them, continuing to grow cotton is just as good as condemning themselves into perpetual poverty.
Merchants refuse to take the blame.
They argue that they have absolutely no control over prices, which is true.
Prices of cotton are determined on the international market, where they respond to market forces.
This makes Zimbabwe a price-taker, with no clout to influence the demand and supply matrix.
As a result, the white gold has basically lost its lustre.
Recently, government announced a producer price of US$0,30 per kilogramme.
The price is not enough to incentivise the 300 000 cotton producers to go back to the fields next season.
On the international market, there are no indications that lint prices would get back to the levels seen in 2011 when prices peaked to US$2,45 per pound.
Recently, the Cotlook A’ Index quoted a daily price of US$0,72 per pound, and usually the price of raw cotton should be half of the international lint prices, which should be US$0,36 per kg.
Farmers believe they are being taken for a ride by contractors.
For some cotton producers in Africa, contract farming has brought respite to countries such as Tanzania which is the fourth largest cotton producer on the continent.
Tanzania adopted contract farming in 2011, well after Zimbabwe had embraced the concept.
Tanzania has succeeded in increasing hectarage to about 1,2 million hectares in the past three seasons, up from around half a million hectares five years ago.
In the face of volatile global prices, Tanzanian cotton farmers are still smiling all the way to the bank.
The same cannot be said for Zimbabwean cotton farmers.
Cotton output for the 2013/14 season declined by 6,2 percent to about 136 million kg, from 145 million kg the previous season.
Prices have remained depressed. For example, a 200 kg bale of cotton is fetching US$60, which is barely adequate to buy five dozens of bread.
Yield per hectare has declined from a minimum of 1 500 kg to 700 kg per hectare last year and in 2013, yield per hectare was as low as 600 kg per hectare.
The same system which has succeeded in Tanzania has dismally failed in Zimbabwe, where it has been a continuous struggle for cotton farmers to survive each year.
In order to earn viable rewards from their crop, farmers are resorting to side marketing the contracted crop.
Unfortunately, side-marketing is never a solution to the problem, as farmers that defaulted on their contractual obligations end up losing property ranging from small farming equipment to cattle, leaving them worse off.
The loss of cattle means that farmers lose their draught power and without draught power a farmer is incapacitated in terms of agricultural productivity.
Contract farming in Zimbabwe can be traced back to the 90s.
While it succeeded at the beginning, it lost steam along the way owing to the country’s worsening economic prospects.
With the economy slackening, it has become increasingly difficult for farmers to breakeven.
Contracted cotton farmers have therefore been facing viability challenges as evidenced by their failure to service bank loans in the wake of declining productivity.
Cotton companies have also responded by reducing contract farming support.
Given the depressed prices, survival of the local producer will be tough although experts argue that to cope with the price volatilities framers need to improve on yield per hectare as a way of enhancing viability.
However it has been impossible for farmers to improve yields as the cost of production is prohibitive.
An expert on African research, Ken Yamamoto, said because cotton was traded globally as a commodity, the biggest effect on commodity prices therefore becomes demand and supply.
Most African farmers cannot sell their commodity directly to global markets so they rely on traders who also have the muscle to lower prices to increase their margins in global trade.
“Zimbabwe does not have a critical mass for cotton to do well on volumes, so they should focus on high value niche high quality cotton. This is what Egypt focuses on via its Egyptian cotton,” said Yamamoto.
Zimbabwe therefore needs to be competitive by increasing volumes.
For countries such as India, they have become more competitive through the use of biotechnology.
In addition to this, they also provide minimum support to their farmers, which is lacking in Zimbabwe.
Despite the difficulties, the Parliamentary Portfolio Committee on Lands, Agriculture, Mechanisation and Irrigation Development noted, in its report, that contract farming remains the best alternative solution for smallholder cotton farmers.
“However, the Ministry of Agriculture in conjunction with the Agriculture Marketing Authority should effectively monitor the terms of agreements and the ultimate selling process,” committee chairperson, Christopher Chitindi, said.