Seed cotton farmers who were holding onto their crop, anticipating an improved producer price towards the close of the marketing season, as has been the norm, should start counting their losses following the crash of prices on the international lint market.
Lint prices on the world market have tumbled from as high as 237 US cents per pound at the start of the marketing season late May to the current 97 US cents per pound.
This development has impacted negatively on seed cotton producer prices, with ginners now paying 40 US cents per kg down from 85 US cents per kg. Farmers have been in the habit of withholding part of their crop in anticipation of the firming of lint prices on the world market and consequently an increase in the producer prices.
Owing to the huge stocks being held by the big players on the world market, lint prices have instead dipped with the effect being felt by farmers who were holding onto the crop hoping for the firming of the price of lint.
Cotton Ginners Association chairman, Mr David Machingaidze, yesterday said ginners had, starting on Monday this week, reduced prices from 85 US cents/kg to around 40 US cents/kg in line with developments taking place on the international market.
“The final price of 40 US cents/kg that ginners are currently paying farmers is still in line with the approved producer price formula.
“If the lint price increase, the benefit accrues to the farmers in as much as it does to ginners and when the world market crashes, as is the case right now, producer prices fall and the effect is huge on the farmers,” said Machingaidze, who is also the managing director of the Cotton Company of Zimbabwe (Cottco).
However, the fall in world lint price has come at a time almost 95 percent of the seed cotton produced by local farmers had been sold and so, the effect of the decline in the producer price will only be felt by a few farmers that were holding onto part of their crop.
Mr Machingaidze said it was important for farmers to always heed the call to sell their seed cotton early because of the uncertainty of the world market
He also urged farmers to ensure they repay the loans extended to them by ginners as part of seed cotton production contract, adding that honouring of contracts would help increase the level of funding for the coming season.
Source: http://allafrica.com/stories/201107271137.html
