|Government, cotton farmers deadlocked|
|Thursday, 31 May 2012 00:00|
Martin Kadzere Senior Business Reporter
Tuesday Government would become the sole buyer of cotton in light of the price deadlock between farmers and ginners.
This is despite the fact that the bulk of the crop was financed by the ginners at a cost of about US$42 million under contract farming.
Last Tuesday, farmers and ginners had agreed on a minimum price ranging between US28c a kilogramme for the lowest grade and US38c for the highest grade. Government would then pay a subsidy of US16c per kg from every grade, bringing the minimum price to US44c for the lowest and US54c for the highest grade.
“Stakeholders shall reconvene to review the prices in line with the conditions from time to time,” read part of Tuesday’s meeting resolution.
But the prices were subject to the approval by the Government.
Economic analysts said the Government’s move would have adverse effects on the viability of the sector, which has been on a steady recovery.
“In addition, the same Government does not have the capacity to buy cotton and this will discourage growth and future investment into the sector.”
“By controlling the cotton prices . . . we are kind of moving backwards where we had payment delays particularly to maize farmers.”
China also subsidises producers to keep them motivated to grow cotton.
On May 9, the Agriculture Marketing Authority had set minimum prices from between US36c for the lowest grade and US50c for the highest grade.
Futures for December are down by 11,8 percent from US71,7c. The New York Futures give an indication of the price levels that can be expected at a future date and contract sales can be made using the futures market indications.