ANALYSIS

Farmers and ginners are always embroiled in "war" over the pricing of seed cotton, with growers believing they are being ripped off while ginners are convinced they are paying the right producer prices. The problem has persisted mainly because of lack of understanding of the dynamics on the international cotton market. The ginner pays on the basis of what is obtainable in the market yet on the other hand the farmer wants the maximum possible price, a huge expectation gap.

The other factor that causes this expectation gap is perception that the ginners want to pursue their own interests, which is really a result of misinformation.

Disputes with regards to pricing are not unique to cotton, they are common for most commodities. Competition among ginners and oversight by Agricultural Marketing Authority (AMA) ultimately protects farmers.

The international market of cotton just like any other commodities is a complex market. There are so many fundamental factors at play in the cotton market that even professionals find it difficult to comprehend what will be happening.

The world economic outlook has become so uncertain and this has brought with it unimaginable volatility in the market.

It's a mad market and understanding the market needs some training to the farmers and other stakeholders so that they can grasp the concepts involved.

We hope the current problems over seed cotton pricing will be tackled to the satisfaction of all parties involved, as there is so much growth potential in seed cotton production.

It can never be disputed that farmers and merchants need each other and resolving the issues around seed cotton prices is in everyone's interest. While we acknowledge that over 95 percent of seed cotton is produced under contract between growers and merchants, we believe that should never be used as a reason for ripping off farmers.

Where market forces dictate that prices should be favourable to growers, we encourage merchants to play ball and when the same market forces dictate that producer prices should not be favourable, we also expect farmers to understand the dictates of economic forces.

We also believe that while merchants are in business to make profits, they are not devilish to the extent of pulling down farmers even when the prices of lint on the world market are firming.

They will still make their money by paying farmers prices good enough for them to realise value in seed cotton production.

But it would be expecting too much for the merchants to be paying farmers through the roof when lint prices on the international market are depressed, as is the case at the moment.

It is our hope that farmers and merchants get to understand the developments on the lint market so that they agree on a producer price that gives all parties value to remain in business.

Let us not bring politics to matters that are purely driven by markets forces. Lint prices are depressed because some countries in Asia and the Far East are holding huge stocks of lint, which has pushed down the demand for it and consequently a drop in prices.

The effect of such a scenario is not limited only to such countries but also affects our local farmers.

We hope sanity will prevail and that threats by farmers to withhold their crop, which interestingly is financed by the same merchants they are at loggerheads with, remain just that, threats.