Harare — AS the war between cotton farmers and merchants over prices continues, Government may intervene and set minimum prices amid revelations that the matter has been referred to Cabinet.

Cotton merchants were offering US30c per kilogramme, which farmers argue was too low, hence not viable, and threatened to withhold their cotton if the prices were not hiked.

The Cabinet Committee on Cotton met last week and discussed the contentious issue after farmers and merchants failed to agree on the right prices and reportedly made recommendations to be presented to Cabinet today.

Industry and Commerce and Commerce Minister Welshman Ncube said the Cabinet Committee on Cotton met and agreed that Government must intervene.

Minister Ncube would not discuss finer details of the issue for fear of pre-empting the issue before it has been presented to Cabinet, but pointed out the recommendation related to setting minimum prices for all cotton grades.

"We met and discussed the issue and the Cabinet Committee on Cotton has made recommendations to be presented to Cabinet tomorrow (today) and which I cannot say out before it has been presented. It is however a question of having minimum prices for grades A, B and C," he said.

The issue of cotton producer prices has become almost a perennial problem, which, coupled with economic instability of the past decade, has resulted in a sustained decline in the production of the white gold.

Cotton merchants have refused to submit to farmers' demands for higher prices arguing that cotton prices were also depressed on international markets. Cotton is selling at just over US23 cents on international markets although prices may firm as demand from China rises.

A number of farmers however find themselves in a catch 22 situation due to contractual obligations as thousands grew the crop after being funded by merchants.

Apparently, a considerable proportion of the country's cotton growing farmers grew the crop under contract as most did not have the financial resources to purchase requisite inputs after a decade long economic instability.

This threatened future cotton production, which dropped from 333 000 tonnes in 2004 to 140 000 tonnes in 2005 weighed down by discouraging prices.

The introduction of the multi-currency system and stable macro-economic conditions saw confidence returning in the cotton industry last year with contractors targeting to invest over US$30 million in the white gold.

It was also expected that output would top 248 000 tonnes this year from 226 000 tonnes achieved the prior year and would bring in US$100 million in export proceeds.

It appeared the industry was on a recovery path, but poor prices by cotton merchants threatens to through the once viable industry into a deep abyss of viability constrains and might force many farmers to opt out of cotton production altogether.

The situation has prompted Agriculture Minister Joseph Made to announce that Government would rope in Chinese firms to buy cotton at better prices.

China has the biggest textile industry in the world and doubles as the number one producer, at three million tonnes each year, but still falls short of its national demand and has to import an additional 2 million tonnes.

Its textile industry has been booming supported by a huge population of about 1,2 billion people whose spending power has been rising over the last three decades during which China's economy grew at above 10 percent.

Expectations are that the signing of a cotton purchase agreement with China Textile Association Import and Export Company would raise cotton prices.