The problem started when cotton merchants reduced
prices for cotton purchase from farmers to 30 US cents per kilo which
farmers argue was too low, hence not viable, and threatened to withhold
their cotton if the prices were not hiked. ..Zimbabwe’s Cabinet
Committee on Cotton met last week and discussed the contentious issue
after farmers and merchants failed to agree on the right prices and
expected to make a decision at the earliest. ..The issue of
cotton producer prices has become almost a perennial problem, which,
coupled with economic instability of the past decade, has resulted in a
sustained decline in the production of the white gold. ..Cotton
merchants have refused to submit to farmers’ demands for higher prices
arguing that cotton prices were also depressed on international
markets. ..Cotton is selling at just over US23 cents on international markets although prices may firm as demand from China rises. ..A
considerable proportion of Zimbabwe’s cotton growing farmers grew the
crop under contract as most did not have the financial resources to
purchase requisite inputs after a decade long economic instability. ..This
threatened future cotton production, which dropped from 333 000 tonnes
in 2004 to 140 000 tonnes in 2005 weighed down by discouraging prices. ..The
introduction of the multi-currency system and stable macro-economic
conditions saw confidence returning in the cotton industry last year
with contractors targeting to invest over $30 million in the white
gold. ..It was also expected that output would top 248 000
tonnes this year from 226 000 tonnes achieved the prior year and would
bring in US$100 million in export proceeds. ..It appeared the
industry was on a recovery path, but poor prices by cotton merchants
threatens to through the once viable industry into a deep abyss of
viability constrains and might force many farmers to opt out of cotton
production altogether. ..The situation has prompted the country to announce that Government would rope in Chinese firms to buy cotton at better prices. ..China
has the biggest textile industry in the world and doubles as the number
one producer, at three million tonnes each year, but still falls short
of its national demand and has to import an additional 2 million
tonnes. ..Its textile industry has been booming supported by a
huge population of about 1,2 billion people whose spending power has
been rising over the last three decades during which China’s economy
grew at above 10 percent. ..Expectations are that the signing of
a cotton purchase agreement with China Textile Association Import and
Export Company would raise cotton prices ”
Date:6/16/2010
Source:economictimes.indiatimes.com