Cotton output in Tanzania, AfricaΆs fourth-biggest producer of the fiber, may drop 30 percent this year after lower prices discouraged growers and pesticide distribution was curbed, the Tanzania Cotton Board said.
Output may decline from the 354,000 metric tons produced the previous season, Gabriel Mwalo, the boardΆs director of finance and administration, said in an interview yesterday in Dar es Salaam, the commercial capital. Plantings have been cut to 1.1 million hectares (2.7 million acres) this growing period, from 1.4 million hectares last year, he said.
“International prices for cotton have fallen, pushing some farmers to food crops,” Mwalo said. “Farmers also received less inputs this season, most notably pesticides, because of challenges with the contract-farming system,” which has been suspended, he said.
Cotton futures were the second worst-performing commodity last year on the Standard & PoorΆs GSCI Index of 24 raw materials, tumbling 18 percent on ICE Futures U.S. in New York as global inventories swelled. Tanzania ranks behind Mali, Burkina Faso and Egypt as AfricaΆs largest grower of cotton, according to the Food and Agricultural Organization.
Tanzanian cotton production surged 57 percent last year from 225,000 tons produced in 2011, helped by the introduction of contract farming across the country following a three-year pilot program in the northwestern Mara region.
Under the system, farmers agreed with buyers to supply specific quantities and qualities of the crop, and farmers gained access to credit for inputs such as pesticides, Mwalo said. That eliminated the need for agents and local lenders to facilitate relationships between growers and buyers, he said.
Loan Defaults
Resistance by lenders and agents to contract farming led to the programΆs suspension in order for the industry to “iron out the challenges,” Mwalo said.
About a quarter of all loans in Tanzania go to the agriculture industry, with about 10 percent going to cotton farmers, according to Lawrence Mafuru, former managing director of National Bank of Commerce Ltd., the Tanzanian lender owned by South AfricaΆs Absa Group Ltd. Impairments at Tanzanian banks grew last year because of the failure by borrowers to repay debts as cotton prices fell, he said in December.
As a result of the suspension of contract farming, TanzaniaΆs Cotton Development Trust Fund cut the amount of pesticide distributed to farmers to enough packs to cover 1.1 million acres, compared with 3.6 million acres last year, he said. No alternative arrangements have been made for pesticide distribution in the absence of the program, Mwalo said.
Contractors
Tanzania has more than 40 ginning companies, including S.M. Holdings Ltd., Alliance Ginneries Ltd., Birchand Oil Mill Ltd., Afrisian Ginning Ltd. and Gaki Investment Co.
TanzaniaΆs cotton-planting season begins in October and ends in January, while harvesting takes place from June to December. The East African nation exports about 70 percent of its output and the rest supplies domestic textile factories, Mwalo said.
While most of the countryΆs cotton is grown in western regions, the industry board plans to encourage sowing in the east, which currently accounts for about 1 percent of total production, according to Mwalo. About 46 of TanzaniaΆs districts are involved in cotton production and as many as 500,000 farmers are engaged in farming the cash crop.