Cotton farmers in Kenya are reaping premium prices as the effect of rising global prices filters into the local market, raising fears of widespread return to synthetic fibre.
Ginneries have raised lint prices by 25 per cent from the Sh96 per kilo minimum price threshold set early this year to Sh120 in response to the current shortage that has hit the international market.
“There is absolutely no cotton coming into the country from the region and there is real fear of large scale switch to synthetic clothes like nylons or polyester if price surges continue,” said Mr David Masika, the Kenya Cotton Ginners Association chairman.
In normal years, local farmers produce only 15 per cent of the average domestic consumption with the rest of the requirement usually coming from neighbouring countries like Uganda, Tanzania and Sudan.
At the beginning of year, the industry had set itself a minimum price threshold of Sh32 per kilo of seed cotton (or Sh96 per lint cotton since ginneries take three kilogrammes of seed cotton to process one kilogramme of lint).
The minimum price was meant to cushion the local farmers from a market glut that usually occurs at harvesting time since the countries in the region have coinciding production patterns.
“Cotton price rallies have come at the worst time for the industry because we are already paying heavily for transport,” said Mr Masika who is also the managing director of Makueni Ginneries.
The prices for cotton lint was on Tuesday hovering between Sh155 and Sh160 per kilogramme on the US’s ICE Futures — the levels last seen 15 years ago—as delayed harvests and booming demand in Asia strained available stock.
In the international market, the current prices which are 33 per cent above the levels that obtained at the beginning of the year have been attributed to bad weather in China — the world’s leading grower and importer of cotton — and the flooding that has affected production in Pakistan.
Players in the local textile industry said the current price rallies are driven directly by increased demand from China, Bangladesh and India but painted gloomy outlook ahead.
“We expect things to get worse once the many middlemen in the cotton value chain begin to adjust their margins with the effect being felt up to household levels as prices of school uniform and designer clothes hit the roof,” said Mr Harrison Kinuthia, the general manager at Sunflag Textile and Knitwear Mills Ltd.
Data from Cotton Development Authority indicates that Kenya’s production currently ranges between 20,000 bales and 30,000 bales out of the 180 bales of raw lint that the local textile firms consume annually.
In an earlier interview, the Authority’s CEO, Micah Powon, said he was counting on the recently introduced contract farming to raise the level of local production.
The authority projects to raise the level of the country’s cotton production to 108 bales by 2013, meaning the country will continue to rely on exports.
On the other hand, Uganda which does not have textile factories has managed to raise its cotton production level to 300,000 bales while Tanzania’s cotton enjoys a production of about 700,000 bales.
“All this production is achieved around the Lake Victoria regions of Mwanza for Tanzania and Jinja for Uganda and we fail to understand why we can’t do the same with our side of Lake Victoria which share the same climate conditions,” said Mr Kinuthia
