Cotton prices decline
COTTON prices on the international market have remained depressed, averaging 56,65 cents a pound from previous highs of as much as 90 cents per pound.
On April 14, 2016, the Cotlook Index quoted a price of 69,40 cents per pound.
The low prices are likely to have a negative impact on cotton growers in Zimbabwe.
Last year, merchants proposed to pay an interim price and later pay an adjustment based on grades. They paid a Grade D price of US$0,30 per kilogramme for all the cotton and were to later pay the balance after grading.
Reports from a Cotton Producers and Marketers Association representative, Morris Mukwe, indicate that some merchants failed to pay farmers the balance.
In areas such as Nembudziya, Nyarupakwe, Ganyungu, Patchway, Masakadza, Chireya, Zumba, Sengwa Bridge, Manoti and other places around Gokwe, buyers failed to collect cotton in time at buying points. This made it difficult to meet the adjusted payment deadlines.
Once considered white gold because of the high prices it fetched on world markets, cotton’s lustre is on the wane and farmers have abandoned the crop in favour of alternative crops due to poor international prices.
Trends from August 2013 by the International Cotton Advisory Committee show that prices have been on a downward spiral from as high as 90 cents per pound to the current prices of 69 cents per pound.
“Cotton is a commodity whose price is considered in a global context since both Zimbabwean cotton farmers and ginners do not have any say when it comes to determining lint prices on the international market. In all cotton producing countries in the region and the world over, the price of seed cotton is tied to the international price of lint which is dictated by the law of supply and demand. Be that as it may, cotton production from this region is so negligible that it has no impact on prices at all,” Cotton Ginners Association director general, Godfrey Buka, said.
“Most of the Zimbabwean lint is sold on the international market as very little is taken up by the local value addition chain.
“The basis of producer price determination in cotton producing countries is known as the A Index, an internationally recognised barometer of cotton lint price movements.
“The cotton fraternity world-wide uses the Cotlook A Index calculation which is derived from quotations of lint sales from selected countries which will give an average price,” he added.
Reports indicate that prices have been declining since the beginning of the year and with China planning to reduce its massive 10 million cotton reserves this April, prices are expected to decline further.
The expected decrease in prices comes amid reports that subsidised cotton from developed countries was affecting the competiveness of Zimbabwean ginners.
Statistics show that subsidies to the cotton sector, including direct support to production, border protection, crop insurance subsidies, and minimum support price mechanisms amounted to an estimated US$10,4 billion in the 2014/15 season, up from a record of US$6,5 billion in the 2013/14 season.
Twelve countries provided subsidies in 2014/15, and the subsidies averaged 22 cents per pound, up from 15 cents per pound in 2012/13.
Over the years, farmers have failed to meet the country’s ginning capacity of 600 000 tonnes per year as production continues to decline every year.
Last year, cotton production declined by 34 percent from 136 000 tonnes in the 2013/14 season to 90 000 tonnes in the 2014/15 season due to the drought conditions .
This was the second lowest crop after 60 000 tonnes was harvested in the 1991/92 season also due to severe drought conditions.
The area planted with cotton seed in the 2014/15 is estimated at 190 000 hectares, a 24 percent decrease from the 250 000 hectares planted in the 2013/14 season.
This is mainly as a result of the late start of the raining season, the reduced inputs support by contractors and the undertaking by some farmers, particularly in high rainfall areas, to produce higher value crops.
Output for 2016 is expected to decline as issues to do with pricing, financing and the drought heavily affected production this year.
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