IN what has become the norm in the cotton sector, farmers and ginners are again at loggerheads.
The tiff between producers and ginners has become a common feature in every marketing season.
This trend has had a negative impact on the growth of the sector.
Farmers have accused ginners of reaping them off while the buyers insist that prices offered are ‘reasonable.’
To an observer it seems cotton production is a lucrative business for ginners rather than the farmers.
To determine producer prices, the cotton industry uses international lint prices as a benchmark.
In most producer countries, the price is normally estimated because the actual price is only known at the time when the lint is sold.
Ginners and farmers monitor world markets and meet to review prices according to developments that occur to ensure that all stakeholders’ are satisfied.
The agreed pricing formula takes into account three variables namely the growers’ cost of production; the ginners’ cost of production and the international lint price at the time the lint would have been sold.
The formula also offers the sharing of sales proceeds from lint and ginned seed.
Unfortunately, because of the small size of the crop from Zimbabwe, local production cannot influence world market prices for lint on the international market, which reduces the domestic players to price takers.
The country produces an average of 100 000 tonnes of lint per year out of global production of 28 million tonnes.
The domestic industry consumes less than three percent of the cotton produced locally.
The cotton business has become an important export earner for Zimbabwe even though it is faced with increasing global competition, including the effects of subsidies for cotton farmers in the United States.
Local farmers have bemoaned the use of the international lint prices as a benchmark arguing they were producing the white gold under different environments as their counterparts.
Most local cotton farmers are contracted to produce the crop.
Zimbabwe Farmers Union (ZFU) vice-president Berean Mukwende said farmers who are contracted to grow cotton were likely to get minimal profits as compared to those that grow free cotton.
Cotton is one of the crops that thrive on contracts.
An estimated 250 000 smallholder farmers produced 99 percent of the country’s cotton crop mainly through contract farming schemes with cotton ginning companies.
Under the contract system farmers are given seeds and chemicals by ginners whom they have to repay after selling the crop.
“It may appear as though farmers are not making a profit, but they are even though the profit margins are minimal,” said Mukwende.
“Most cotton farmers are contracted and they are not growing free cotton hence at the end of the day their profits are shared between them and the contractor thereby in most cases halving the returns.”
Mukwende said ginners make more profits than farmers as they value add the crop.
“Farmers sell raw cotton to ginners who in turn process it and export lint and cotton seed to oil processors and stock-feed manufacturers,” he said.
“Ginners sell two by-products of cotton and in the process they make more than farmers who sell one product.”
Most ginners, Mukwende said did not sell lint during the official marketing season when farmers are selling their crop.
Unlike ginners farmers did not have the capacity to withhold their crop and sell it at a ‘convenient’ time as they did not have proper storage facilities and this would resulting in the wilting of the crop.
“It is agreed that contract farming provides an alternative source of funding, there is need to effectively monitor the terms of agreements and the selling process to make sure the farmers are not prejudiced,” he said.
Recently ginners were up in arms with farmers from Gokwe accusing them of side marketing.
Zimbabwe Commercial Farmers Union president, Wonder Chabikwa said local producers were operating under difficult conditions.
“Local cotton producers are not competitive enough,” he said.
“The environment we produce our crop is different from that of our counterparts in other countries.
“Our cost of production is high given that there are no subsidises on inputs yet those in countries such as China, India and Burkina Faso get between 30 and 50 percent subsidises on inputs.
“So on the market their profit margins are higher than ours and we get to complain that the prices are not viable.”
Chabikwa said for farmers to get more returns they should value add.
“Ginners are making more as they value add and sell by products so it is advisable that farmers add value to the crop if they intend to reap more from their hard work,” he said.
Given the depressed prices, survival of the local producer would be dependent on improving yields and quality as a way of enhancing viability.