Global lint price affects Malawi

The slump in global price of cotton lint has affected Malawi’s cotton price hovering at around K100 per kilogramme in all the markets countrywide, the Cotton Development Association (CDA) said on Monday.

According to CDA president Jesse Kitta, global prices of lint have dropped 53 percent to $1.90 (K317 at the official exchange rate) per kilogramme from last year’s $4 (K668) per kilogramme.

But the prevailing selling price on the markets is well above the government’s set minimum price although below last year’s opening prices of K120 per kilogramme.

This year’s minimum prices have been pegged at K78 per kilogramme for grade A, K3 up from last year’s K75 per kg. Grade B has been put at K63 per kilogramme, K7 down from last year’s K70 per kilogramme.

But Kitta hoped that price 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 Malawi’s cotton because of its prices,” he said.

But Kitta said this year, the ginners have received orders from their international counterparts to buy all the cotton in the country.

He disputed experts’ assertions that the higher than expected cotton output this year will have a dent on the prices, saying regional neighbours such as Zambia and Zimbabwe have been producing far more than Malawi.

On their part, the Cotton Farmers Association (Cofam) is so far not satisfied with the opening price of the crop, but hopes the situation will turn out positive as the season progresses.

“We had hoped for the prices to go up from last year’s opening price of K120 per kilogramme. Most of the farmers lost a substantial amount of their crop due to insecticides and we anticipated that the prices will be a solace to us,” said Steve Dodoma, a member of Cofam.

The Ministry of Agriculture, according to the first round crop estimates, has projected a 365 percent increase in cotton output for the 2011/2012 season, at 244 154 metric tonnes, up from last season’s 52 456 metric tonnes.

Output for cotton, one of the country’s strategic crops and ranked third as the country’s major foreign currency earner, after tobacco, sugar and tea has substantially gone up owing to government’s K1.6 billion fund in the 2011/12 national budget.

Compelled by good prices last year that peaked at as high as K200 per kilogramme, more than 200 000 farmers grew cotton on an increased hectarage of 400 000 in the hope of raising about $300 million (K50 billion) in foreign exchange.