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JF Admin
- Feb 26, 2006
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local cotton exporters have become the latest victims of the global financial crisis that has hardly paralysed the world`s economy as the international buyers decide to suspend their earlier agreements to buy about 50 of the countrys ginned cotton during the 2008/9 season. As a result, the tanzania cotton lint and seed board (tclb) said this week that at least 260,000 bales of cotton still remain unsold by the ginners due to defaulting of external buyers.
Following the development, it is estimated that the cotton industry in the country will incur a huge loss amounting to over $34(sh40billion) this year, the regulatory authority has stated.
Only 384,260 out of the 643,000 bales of raw cotton bought and delivered to ginners have been exported, said the board director, citing the global financial turmoil as the main reason.
Cotton production this season almost doubled to 643, 000 bales compared to the 371, 000 bales harvested in the year 2007/08.
Tcb attributes the double production for the 2007/08 crop at 643,000 bales, a record yield in the country, to early distribution of farm inputs and better prices in the previous year, which encouraged farmers to increase production .
However, speaking to the guardian on sunday in an exclusive interview this week, tcb`s director general joe kabissa, said farmers have not been directly affected by the unstable market demand as their cotton was sold to ginners before the fall of price in october.
``tanzanian farmers have not been directly affected by the financial meltdown because they sold their cotton long before price went down,`` he said, adding : ``the global crisis cannot be directly linked to cotton problems in the country.``
he said by june, farmers had started selling the crop at the mentioned amount of money per kilogramme, but the worst hit was in october when the global meltdown was at the peak.
The authority said, tanzania with 642,925 bales (116,369 tones of lint), sold at an average price of 77 us cents per pound could have earned 198 million us dollars (257bn/-).
The industry is projected to incur about the loss due to the fact that only 384,260 bales (69,551 tonnes of lint) were sold at 77 us cents and the balance 258,675 bales (46,820 tonnes of lint) would fetch 45 us cents per pound, according to the director general.
Industry watchers argue that ginners` failure to sell all their cotton meant they might not be able to repay their bank loans and interests in time and this worries respective banks.
It has reliably been learnt that, tanzania cotton board had already written to the ministry of agriculture, food security and cooperative.
Other stakeholders have also expressed concern over the fate of raw cotton and unsold bales plus their security from spoilage and fire given the pathetic condition of some warehouses at ginnery compounds.
Since then cotton prices have been declining over the years from 75 us cents per pound in 1985/86 to 35 us cents.
There is urgent need to process all organic cotton into garments at factories which can do that to add value and evade the un-remunerative export market of raw cotton, the stakeholders have said.
There is also urgent need for more ginners to engage in selling their cotton on forward sales rather than spot market.
``ginnery owners should upgrade their warehousing at ginnery compounds as well as at buying posts, in order to accommodate farm level storage of seed cotton for prolonged periods of time,`` observed one stakeholder.
It is also suggested that the tanzania cotton association should reconsider to either construct or lease warehouses in the far east, which would allow for timely dispatch of cotton to spinners so that it can be used to stock cotton in years of crisis.
The minister for agriculture, food security and cooperatives, mr stephen wassira recently said, the ministry was aware of the situation and that the matter would be forwarded to the government for further action.
``we know the situation and not for cotton alone but also for other crops. Yesterday (friday) i had a meeting with various cooperatives and we discussed the matter,`` the minister said when reached for comment on phone.
China which accounts for over 40 per cent of global lint imports has resorted to cutting down imports by over 75 per cent because retailers in the usa which also consumes over 40 per cent of the global textile output could not get the necessary financing.
The international merchants, who buy cotton from all over the world, including tanzania, had to cut down their lint imports in order to accommodate these unforeseen developments.
Cotton is an enormously important commodity throughout the world. However, many farmers in developing countries, tanzania inclusive receive a low price for their produce, or find it difficult to compete with developed countries.
Us, the greatest cotton exporter by 40 per cent has turned to bio-fuel production. The country has embarked on concerted efforts to increase fuel production.
The move was said to have caused a potential market shift, though economists argue that it was a mere speculation as the decline could amount to only ten per cent in cotton consumption.
With such instability, tcb foresees a possible poor harvest in the next season if no serious steps are taken to assist farmers who rely solely on subsidy on seeds and fertilizer from the government.
However, the regulatory authority expects 2008/09 cotton harvest to increase by 40-50 per cent, helped by good weather and as farmers boost production in response to strong prices in the 2007/08 season.
``the year 2008/09 production is expected to increase by 40-50 per cent because of favourable weather conditions and (the) good price that was offered to farmers in 2007/08 marketing season,`` said kabissa.
The board said producers fetched an average price of 480 shillings ($0.4) per kg of seed cotton in 2007/08, compared with 280 shillings per kg in the previous season.
Expounding on the good prices, kabissa said conducive climate coupled subsidy from the government was a big boost to farmers.
The government released seeds and chemicals to farmers early enough, thus the improved harvest.
The country earned $71.7 million from cotton exports in the year ended march, up from $40.6 million in a similar period in 2007, according to the central bank of tanzania.
The east african nation - where more than 40 percent of its 39 million population depends on cotton for a living - grew 129,000 tonnes in 2006/07, according to the tanzania cotton board.
* source: Sunday observer