Cotton industry passing though a bad phase
December 15, 2008 - Tanzania
On the back of declining cotton prices in the international market, Tanzanian cotton industry is likely to incur huge loss.
At the start of the buying season on June 14 of the ongoing year prices paid to farmers for seed cotton stood at 400 shillings per kg and by end of August they had risen to 540. Due to an on going commodity boom farmers had expected to get up to 600 shillings per kg.
However, by the end October, when cotton lint prices dropped to 47 US cents per pound, few farmers who normally sell their cotton towards the end of their season could no longer sell their cotton.
Similarly several ginners who had not yet sold their cotton are now unlikely to sell it at all as most overseas buyers are canceling orders or even defaulting on contracts. It is estimated that well over 200,000 bales may not be sold this year due to the prevailing financial circumstances. This will have far reaching implications on the health of the cotton industry.
Within the agricultural sector, cotton is by far the largest sub sector that provides livelihoods to over 40 percent of the total population of the country directly or indirectly. Thus market experts expressed their concern saying that if ginners’ fail to sell their cotton, they might not be able to repay their bank loans and interests in time and this in turn would create problems for respective banks.
By 31st October 2008, a total of 27,371 tons of lint worth $41 million had been exported. The major destinations of Tanzanian cotton lint continue to be China, Indonesia, Bangladesh, Taiwan, Vietnam, Pakistan, Portugal and Kenya.
Even, local consumption of lint continues to be low. During the 2007/08 season the 21 textile mills consumed a total of 37,489 tons of lint compared to 23,590 tons during the 2006/07 period.
Tanzania Cotton Board has urged the Ministry of Agriculture, Food Security and Cooperatives, to take appropriate measures and avoid further losses.