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Dreams for better cotton prices shattered
2006-01-04 14:29:52
By Mgeta Mganga
The dream of cotton producers in Tanzania to cash in on reduced supply of cotton in the world market for the year ending June 2006 has been shattered.
Cotton producers in the country and elsewhere in Africa expected a rise in the cotton price following the hurricanes Katrina and Rita, which occurred last year, and affected the cotton crop in the USA.
But cotton farmers and other stakeholders seem to be living in a dream world. The most affected area was Mississippi that produces less cotton compared, for example, to Texas which is the leading cotton producing state in the USA.
The Bank of Tanzania (BoT), in its October 2005 economic report, had predicted improved cotton prices in the world market following expected reduced supply in the USA due destruction caused by hurricanes Katrina and Rita.
If Katrina and Rita had affected production in the state of Texas, there would have been an automatic rise in the world price of the crop, and a smile would have blessed the faces of producers in other lands.
USA and China are the largest cotton producers in the world producing 45 percent of the total amount of cotton produced in the world.
According to the International Cotton Advisory Committee based in the USA, current statistics indicates that the production of cotton in the USA was only slightly affected.
Statistics shows that in the year 2003/04 USA produced 3,975,000 tonnes of cotton, while in the year 2004/05 it produced 5,062,000 tones and this year 2005/06 it has produced 5,040,000 tones.
The total cotton production in the world for the year 2005/06 is estimated as 25 million tonnes.
World consumption of cotton is 24.4 million tones.
According to the low ratio between demand and supply, the cotton price has come down this year due to the fact that the rate of cotton consumption is 24.4 million tonnes while supply is 25 million tonnes.
In an interview with the Financial Times recently in Dar es Salaamm, Joe Kabissa, director general of the Tanzania Cotton Board said that Tanzania is a minor producer of cotton, and its production volume can, in no way, affect the world market price.
He said Tanzania produced 374,053 tonnes for the 2002/2003, and exported 276,423 tonnes. In the year 2003/04, it produced 278,825 tonnes and exported 205,423tonnes while in the year 2004/05 it produced 114,496 tonnes, and exported 464,202 tonnes .
Kabissa said that exports of cotton for the year 2005/06 are still on the way up.
By the end of October last year, a total of 44,766 tonnes worth Tsh.54b were exported compared to 43,488 tonnes worth Tsh.53bn sold in the year 2004/2005.
The current price of cotton in the world market is 0.92 USD per kilo while the cotton price per kilogramme in the country is about Tsh.220 per kg, he said, adding that in a free market economy, the price of the commodity depends on the strength of market supply.
Kabissa pointed out that apart from providing information to farmers, the government is also providing training for farmers on how to produce quality cotton that can be produced in more modern ways so as to meet standards demanded in the world market.
The question of subsidies given to American cotton farmers by their government was a contentious issue at the World Trade Organisation’s (WTO) Hong Kong conference mid last month.
African cotton producing countries, especially those from West Africa, voiced spirited concerns about the blatant hypocrisy portrayed by rich countries that preach free trade, but never practice it in principle.
The US agreed will abolish cotton subsidies in phases.
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