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Supply Factors Push Down Cotton Prices

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by R.B, Sep 5, 2012.

  1. R.B

    R.B JF-Expert Member

    Sep 5, 2012
    Joined: May 10, 2012
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    THERE is nothing peculiar in cotton's price fluctuations, especially in developing countries like Tanzania that are mere price takers in the world market. True, the cotton sub sector plays a momentous role in the national economy, employing about 16 million people and generating huge foreign currencies.
    But, Tanzania's little supply of hardly 0.2 per cent of global deliveries denies the country a say in international business of the cash crop.
    Before some politicians decided to politic in cotton, a purely economic matter, cotton growers in the country were seemingly adaptive to the ups and downs in their produce prices, which are determined by the forces of demand and supply in the world market.
    The windfall prices of up to 1,100/- a kilogramme during the 2011/12 marketing season inspired cotton farmers in the country to increase production in the following year, expecting further price increase. Weirdly, due to reasons beyond control, the prices flopped almost 40 per cent to 660/- per kilogramme, offering good grounds for some people to play their deceitful games.
    The 2011/12 cotton price surge was attributed to an increase in global consumption and dwindling global production through the end of the 2010/11 season. But, beginning in the 2011/12 through the current seasons, global stocks of cotton lint reflect about eight months of production inventory, far above the global stocks in the 2008/09 through 2010/11 period.
    As with the principle of demand and supply, high supply pushed down the prices in the 2012/13 marketing season. Surprisingly, some self-proclaimed farmers' supporters opted to snub the facts they knew well to deceitfully marshal farmers to refuse selling the crop at prices below 1,000/-.
    Some Members of Parliament (MPs) from the cotton growing areas came up with their popular slogan 'No buku (1,000/-), no cotton,' persuading farmers to keep their cotton if not offered at least 1,000/- per kilogramme. Yet, none offered an alternative market that offered better prices.
    Opening of the crop buying season was delayed for almost a month due to price disputes between buyers, growers and the Tanzania Cotton Board (TCB), the industry regulator, with buyers earlier offering 450/- and producers vowed never to supply at below 1,000/-.
    Even after prolonged negotiations had led the wrangling parties to settle for the 660/-, some politicians swayed growers from selling the produce, giving unfounded hopes of price rise. Some MPs went as far as saying that farmers would better use their cotton to make mattresses than sell at below 1,000/-.
    But amid those cheap statements that probably sought cheap popularity, reports from the lake zone, the cotton producing hub, had it that desperate cotton growers were selling the cash crop to black marketeers at 300/- per kilogramme! "The delay in opening the crop buying season had subjected cotton growers to sheer desperation, with some bowing to temptations by exploitative middlemen to sell the crop at 300/-," the 'Daily News' quoted an official with Mwanza-based ginnery as saying last month.
    Reports from Tanzania Cotton Board (TCB) indicate that the cotton buying season was well underway at the 660/- price, with 174,000 tonnes purchased and 145,000 tonnes delivered to ginneries as of August 24, 2012. TCB projects this year's total production at 300,000 tonnes. So, literally the proponents of the 'No buku, no cotton' policy were offending the very people they were pretending to serve.
    Their waged war on price has created more harm than good to the multi billion sector of the economy. Farmers, who were given fictitious hopes of price appreciation, are a frustrated lot today and might snub the crop, indefinitely. Yet, Tanzania's prices are not that bad for, according to the Cotton Outlook Magazine that tracks global cotton prices, the farm gate price of 660/- is the highest among the East and Central African countries currently marketing the cash crop.
    At an average exchange rate of 1,571/- against the US dollar, cotton growers in Tanzania receive 42 US cents, beating their counterparts in other cotton producing countries -- Zambia, Zimbabwe and Mozambique. The Magazine quotes cotton prices in Zambia at between 32 and 40 cents, Mozambique at 37 cents while Zimbabwe has her price ranging between 35 and 42 cents.
    The Zambia's farmers union has halted the marketing season, with the dispute resulting in violent clashes through which the crop inventory was burned and some cotton left on the fields. Although the government in Zimbabwe has reportedly declared official price of between 77 and 84 cents per kilogramme, the enforcement of the price remains doubtful as about two-thirds of the estimated 280,000 tonnes of the crop has already been traded at willing buyer-seller prices of between 35 and 42 cents.
    So, while it's logical for MPs to strongly press for good prices of their voters' agricultural produce, political leaders should always stand by facts, however annoying such facts might be to their voters. That a whole MP can simplify the sensitive cotton marketing, persuading people to sleep on cotton they laboured and invested their time and money to produce is by itself demeaning. One wonders whether that is what Tanzanians, particularly cotton growers, expect of their political leaders!
  2. Mwanahisa

    Mwanahisa JF-Expert Member

    Sep 5, 2012
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    At one point it was declared that Mbunge to represent wananchi it has to be questioned on the level of education and reasoning capacity, hebu ona walivyowapotosha wakulima wakapishana na hela hapo. We have to be more careful with the next word out of a politician mouth vinginevyo tumekwisha.