Ginners are pulling out of the cotton market due to the emergence of the novel coronavirus (Covid-19) pandemic which they say has affected international demand for the produce.
This is according to the 2019/20 Cotton Market Analysis by the African Institute for Corporate Citizenship (AICC) which shows that as a result, the sector’s performance in the economy is at stake.
AICC chief executive officer Felix Lombe said Malawi will likely produce 45 000 metric tonnes (MT) of cotton, a huge leap from the 10 000 MT produced in 2018/19, a situation that needs an injection of approximately K17 billion towards procurement of cotton seed by buyers in the current season.
He said unfortunately, the Agricutural Development and Marketing Corporation (Admarc) does not have financial capacity to buy ithe cotton seed as the State produce trader received K5.2 billion from government to buy all agricultural commodities, including cotton, when the company needs close to K100 billion for that endeavour.
Lombe said:”The delays of market actors is likely to leave farmers, government and Cotton Council of Malawi [CCM] on the losing end considering the investment made this far.
“Admarc needs the money from Export Development Fund [EDF] and if it may not get the facility or delay in getting it, this means some panic on the part of farmers who will be forced to sell to vendors at as low as K150 per kilogramme [kg].”
He emphasised that the role of Admarc in the 2019/20 season and beyond is unprecedented, saying in times when the market system fails, State-owned enterprises should come in to bail out the industry but, unfortunately, Admarc is currently not adequately funded.
Cotton Farmers Association president Dickson Gundani said farmers are helpless as Covid-19 is a global problem that has spared no nation, including Malawi.
Cotton Council of Malawi executive director Cosmas Luwanda said to cushion themselves from Covid-19, private ginners demanded that minimum farmgate prices be reduced to K240 per kg, a situation which meant huge losses for farmers.
He said: “The combined capacity of the three available ginners should be adequate to absorb the entire cotton produced this season.
“After all, the combined ginning capacity of the three available buyers is in excess of 450 000 metric tons annually”.
This year, the sector had registered five cotton ginners to buy from farmers nationwide, but only Admarc and Afrisian have taken up the challenge to buy from farmers.
This is in contrast to last year’s seven ginners who serviced the cotton market.
The development comes as government invested K1 billion into the sector in the current budget and due to the development, over 50 percent of the funds given in form of loans to farmers are at stake as cotton farmers paid 50 percent on point of inputs sale at the start of the season.
Last year, cotton prices hit over K410 per kg but this year government pegged Grade A at K389 and Grade B at K310 as minimum prices per kg.
The crop estimate survey results government released recently show that cotton production has increased from 25 331 MT in 2018/2019 to 52 389 MT in 2019/2020 growing season.
This represents a 106.8 percent increase which Minister of Agriculture and Food Security Francis Kasaila attributed to intensive promotion campaigns, favourable weather, seed availability and good market arrangements. Cotton is one of the most important cash crops grown in Malawi and ranks fourth as a foreign exchange earner after tobacco, tea and sugar.