The 20 percent slump in cotton prices to about K80 (about $0.32) per kilogramme from K100 ($0.40) at the opening of the markets last month, has irked growers who fear incurring losses and failure to repay loans.
This yearâ€™s minimum prices are pegged at K78 per kilogramme for grade A, K3 up from last yearâ€™s K75 per kg.
Grade B is at K63 per kilogramme, K7 down from last yearâ€™s K70 per kilogramme threshold. Last year, the prices opened at K120 per kilogramme and peaked at as high as K200 per kilogramme towards the end of the market.
Cotton growers are feeling the pinch of the drop in global prices of lint by 53 percent to $1.90 (K475, at the official exchange rate) per kilogramme from last yearâ€™s $4 (K1 000) per kilogramme due to oversupply.
In an interview on Monday, Steve Dodoma, a member of the Cotton Farmers Association (Cofam) said this yearâ€™s prices are lower than expected because growers, who had high hopes of a continuation of the last yearâ€™s prices, produced more.
Good prices on the global market last year pushed up the prices in Malawi.
Because of this, government set up a K1.6 billion fund in the 2011/12 budget to support cotton growers to produce high quality lint for domestic and export markets.
The money was disbursed as loans to smallholder growers to increase the hectarage to 200 000 which government hoped would raise over $300 million (K75 billion) in foreign exchange to boost the much-depleted foreign currency reserves.
This year, Malawi has produced 244 154 tonnes compared to only 52 456 tonnes last year, representing an increase of 365 percent.
Dodoma said they are not satisfied with the prevailing prices of the crop, but hoped the situation will improve as the season progresses.
“We hoped for the prices to go up from last yearâ€™s opening price of K120 per kilogramme. Most of the farmers lost a substantial amount of their crop due to pests and we anticipated the prices to be better to compensate for this loss,” he said.
He said reports from across the country indicate that most of the farmers are frustrated because they had hoped for the best this year.
The Cotton Development Association (CDA), a grouping of 10 local ginners, said the global prices slump has knocked down Malawiâ€™s prices.
CDA president Jesse Kitta in an ealier interview hoped that prices will rise as the marketing season progresses stressing that the principle of demand and supply is at work.
“Malawi cotton has been expensive on the global market. In 2009, international buyers abandoned Malawiâ€™s cotton because of its prices,” he said.
Kitta said this year the ginners have received orders from their international counterparts to buy all the cotton produced in the country.
He disputed expertsâ€™ assertions that the higher-than-expected cotton output this year is having a dent on the prices, saying regional neighbours such as Zambia and Zimbabwe have been producing far more than Malawi.
Meanwhile, the Ministry of Industry and Trade has lifted the export ban on cotton lint, but has instead imposed an export embargo on seed cotton and cotton seed.
In a statement, the ministry said the embargo has been imposed because of great demand of the seeds locally and to avoid last yearâ€™s scenario of importing the same after exports.